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LucasVarity to Sell VarityPerkins for $1,325 Million

11 December 1997

LucasVarity to Sell VarityPerkins for $1,325 Million

    LONDON, Dec. 11 -- LucasVarity plc today (London: LVA,
NYSE: LVA) announced that it has conditionally agreed to sell VarityPerkins to
Caterpillar Inc for a cash consideration of $1,325 million (803
million British pound sterling).  The sale is subject to the approval of
LucasVarity shareholders at an Extraordinary General Meeting, planned for late
January 1998, and to clearances by antitrust authorities.
    Victor Rice, Chief Executive of LucasVarity, said, "We have secured a full
and fair price for VarityPerkins, which reflects the excellent fit between
Perkins' business and Caterpillar.  We are very pleased with this transaction.
    "As a group we are committed to developing and sustaining global
leadership positions.  The on-highway and off-highway sectors are converging,
driven largely by progressive emissions legislation.  Perkins has a limited
presence in the on-highway market.  Following extensive analysis, we concluded
that it would have been very challenging to develop a major on-highway
business organically by the time emissions legislation converge and securing
such a position through acquisitions is not economically viable.
    "Caterpillar, on the other hand, is a full-line engine producer, and is
committed to developing small to medium-sized diesel engines -- the size range
produced by Perkins.  It is, therefore, exceptionally well placed to take
Perkins forward as a highly successful engine producer well into the 21st
Century."
    Donald V Fites, Chairman and Chief Executive Officer of Caterpillar, said,
"The combination of Caterpillar and Perkins enhances our strategic position in
the worldwide engines business.  The excellent strategic fit between our
companies makes this a natural extension of our strategy to be a global leader
through select investments in or near our core businesses."
    Proceeds from the sale of VarityPerkins will be used to strengthen
LucasVarity's leadership positions in the markets it serves within the
aerospace and automotive industries.
    Under the terms of the disposal, Caterpillar will acquire the whole of the
business and assets of Perkins for $1,325 million in cash, on a debt and cash
free basis.  The consideration is subject to adjustment to reflect movements
in net assets up to the date of completion.  In addition, Caterpillar will
issue a $48.5 million loan note to acquire certain shares in a subsidiary of
LucasVarity.
    The disposal, after tax and transaction costs, will result in an increase
in the net equity of LucasVarity in excess of 400 million pounds.  After
accounting for the write back of the goodwill relating to VarityPerkins
resulting from the Lucas and Varity merger in 1996, the profit on disposal is
expected to be minor.
    VarityPerkins is a leading manufacturer of diesel engines, principally
serving the construction, power generation, materials handling, agricultural,
defence and marine markets.  In the year ended 31 January 1997, its sales
totalled 655 million pounds and its operating profit before exceptional items
was 59 million pounds.  LucasVarity's consolidated net assets at 31 January
1997 included net assets attributable to VarityPerkins of 151 pounds million.
    A circular to shareholders convening an Extraordinary General Meeting to
approve the disposal will be posted as soon as practical.

SOURCE  LucasVarity plc