A proposed merger between Leviand Motors and Associated Commercial Vehicles that would form the biggest manufacturing group of heavy commercial vehicles in the world, with combined total assets of nearly £117m., was announced in London yesterday. It was the outcome of what Sir Henry Spurrier, chairman of Leyland Motors, described as “completely confidential and secret negotiations “.
Its object: “To meet the challenge of world competition.”
The announcement came as a surprise with the news that the directors of the two companies had agreed in principle to recommend a merger to their shareholders. Both boards said they were of the opinion that integration benefits shareholders and workers-and would be ” in the national interest “.
They said that in research and development, in basic engineering and in the rapidly developing manufacturing programmes overseas, considerable economies and advantages should accrue.
Their announcement added: “Both companies will continue to manufacture and sell as separate entities, and in particular will intensify their already forceful export drive.”
The basis of the merger will be that ordinary stockholders of A.C.V. will be offered one Leyland ordinary share for one A.C.V. ordinary share. A.C.V. directors said they will accept this offer in regard to their own share holdings and recommend acceptance of the offer to their shareholders. The A.C.V. group also covers A.E.C. and is concerned in the making of chassis for heavy duty lorries, buses, coaches, and diesel engines for industrial and marine use. It includes Park Royal, Ltd., manufacturers of the London Transport omnibuses, and Charles H. Rowe, makers of the Leeds buses.
The £103m. Leyland group includes the Standard-Triumph Motor Co., British United Traction, makers of diesel engines, are already owned by Leyland and A.C.V.
Sir Henry thought that the standing separately of the groups over the years had been ” a good thing for Britain and our individual concerns. But conditions are changed today, and are changing rapidly. If we are to develop overseas to the extent that before long we may be manufacturing 75 per cent of our total output in the export market, we must put ourselves in a position where we can sell these vehicles from strength rather than weakness.”
Lord Brabazon of Tara, chairman of A.C.V., disclosed that talks had been going on for two months. Together the groups manufacture some 60 per cent of heavy vehicles of over four tons unladen weight. Sir William Black, managing director of A.C.V., put the combined sales of vehicles at £150m. including cars. Sir Henry did not expect that any labour redundancies would follow. The joint group represents 46,000 workers in Britain.
Leyland Motors And A.C.V. In £117M. Merger
If the proposed merger between Associated Commercial Vehicles and Leyland Motors succeeds (and the generous Leyland terms seem to suggest that it will) a giant group with combined total assets of nearly Â£117m. will be created which could do sterling work for Britain’s commercial vehicle exports. The terms of the merger are a direct exchange of one Leyland £1 ordinary share for every £1 A.C.V. ordinary share, which places a value of £18,273,025 on the Leyland offer in terms of last night’s closing price of 84s. 6d. which was 3d. down on the day’s dealings. A.C.V. ordinary shares closed last night unchanged at 62s. 6d.
One aspect which will surprise the City is that neither company sought the advice of their merchant bankers. Announcing the merger last night, the directors of the two companies stressed that the integration of their interests would help meet the challenge of world competition in the commercial vehicle field as well as benefiting both shareholders and workers of both groups. The merger would be in the national interest, they added, for it would help Britain maintain her lead in the commercial vehicles market. Economies in research and overseas development should also accrue. Both companies will, however, continue to manufacture and sell as separate entities and will intensify their export drive. Some 70 per cent of their joint production will eventually be exported, it is estimated.
The two companies are not strangers to each other in working together for they already jointly own all the capital of British United Traction, the company formed to supervise the production and sale of trolley buses-a venture which has so far shown encouraging results. And Leyland’s extensive network of subsidiaries abroad will provide a further outlet for A.C.V. Products. The move is slightly more than a year after Leyland’s last big expansionary drive, when in April 1961, the company acquired all the capital of Standard-Triumph International (which is beginning to show a profit) and although it is a marriage rather than a take- over it is Leyland which will be the dominant partner.
Both companies have good profit records with Leyland maintaining its dividend at 20 per cent for 1961 and A.C.V. paying a total for the same year of 16 per cent compared with 22-5 per cent in 1960. A.C.V. have already paid a 5 per cent interim dividend this year-or 1s. a share-and in announcing the merger terms the Leyland board proposes to declare a special interim dividend of the same amount to ordinary stockholders. Thereafter both companies’ shares will rank pari passu.
No announcement has yet been made as to the 1,500,000 A.C.V. preference shares but the boards promise a statement regarding these at a later date. In the meantime it is safe’ to say that Leyland’s shares will fall on the market today while A.C.V. should soar- the 22s. between their,current market value and the value Leyland puts upon them should ensure this.