Leyland-Standard Merger Proposed

FROM OUR CITY EDITOR

A surprising merger between Standard-Triumph International and Leyland Motors was proposed by both companies last night.
A proposal to this effect was made by Leyland Motors to the Standard board a fortnight ago. If the deal goes through, it will produce a combined group with assets of some £100m. While Standard produce Standard and Triumph cars, commercial vehicles, diesel engines, and gas turbine engines, Leyland, with assets of over £52m., make heavy commercial and passenger motor vehicles, trolley buses, fire engines and heavy oil engines.

Leyland is the largest heavy commercial vehicle manufacturer in the country. Under the proposals Leyland will acquire the whole of the ordinary capital of Standard on the basis of two ordinary stock units of £1 each in Leyland for 15 ordinary stock units of 5s. each in Standard.

Lord Tedder, chairman of Standard, said last night that the Standard directors considered that the proposed terms of the amalgamation with Leyland-" an entirely British concern "-were fair. They recommended their acceptance by all Standard ordinary stockholders and intended to do so in respect of their own holdings.

Leyland Motors Bid For Standard-Triumph
Finance, Industry, and Commerce
By Our City Editor

Among the various possible bidders for Standard - Triumph International mentioned over the past few weeks, Leyland Motors has been one of the least often suggested.  Last night the Leyland directors revealed that they approached the Standard board about a fortnight ago and are now making a share exchange offer for the whole of the issued capital of Standards.

The exact value the bid places on the Standard shares is complicated by the possible price of Leyland when the market learns that the company's pre-tax profits last year were nearly doubled at over £9m. and that a five-point increase in dividend to 20 per cent is forecast. Assuming a price of 85s. for Leyland, this makes the Standard shares worth 11s. 3d. against a closing price last night before the news of 9s. 10-d. and a low of 7s. 6d. earlier this year.

TWO CATEGORIES
The reasons behind the bid can be divided into administrative and financial Categories. Leyland and Standard's products do not overlap at all: Standard makes cars and light commercial vehicles (up to one ton). Leyland makes commercial vehicles of over seven tons. Administratively, therefore, Leyland would be able to offer a comprehensive range of commercial vehicles to meet the wide range offered by overseas competitors.

It will also be able to extend the use of diesel engines into light commercial vehicles, and presumably, if a combined board thought fit, more of the Standard expansion programme could be used for commercial vehicle plant than at present envisaged. For Standard the administrative advantages are not so obvious. The company will benefit from the joint purchasing of raw materials that will be possible, and overseas there will be economies in joint marketing, sales headquarters, warehouses.

MEANING FINANCIALLY
Financially, the offer will mean for Leyland issuing some four million shares and therefore increasing the authorized capital by about £2m. For a 40 per cent increase in issued ordinary capital, Leyland shareholders will get an increase of about 33 per cent in earnings based on a five-year average for Leyland and the latest Standard figures (earlier ones are complicated by Massey-Ferguson).

But on the 1959-60 figures, assuming normal tax charges, the acquisition will add only about 20 per cent to earnings. For Standard the financial attractions of the offer are clear. The company's last balance sheet suggested that it had been severely hit by the motor recession, with the stocks figure up from £9m. to £20m. and the cash position down from £14m. to £3m. Now the board announces that with three months of the financial vear completed, it does not expect to be able to maintain the dividend rate at 12 per cent.

While this setback is seen as a temporary phase, Mr A. S. Dick, the newly elected chairman of Standard, said yesterday that it might take two or three years "to pull the group together ".

Leyland shareholders will clearly need more precise information about Standard's current trading position before authorizing an increase in their own capital to make the bid possible. Details will presumably be included in the formal offer.