BLMC in takeover talks with Innocenti

THE GUARDIAN
By Anthony Harris

British Leyland is holding talks with Innocenti, the Milan engineering company which makes the BMC Mini and 1100/1300 for the Italian market. This could lead to a partial takeover of the Italian firm, and IRI, the Italian State holding company, is also involved in the talks.

The talks, being led on the British side by Mr Filmer Paradise, Austin-Morris sales director and former head of BMC's European office in Milan, seem to have been started by the desire of the controlling Innocenti family to find a buyer for its shares. The family made earlier, abortive approaches to potential Japanese buyers , including Nissan Motor. Innocenti has had a marked success with its BMC models. It sells about half as many Minis in Italy as British Leyland sells in Britain.

Last year the company made 50,000 BLMC models, mainly Minis, worth £26 millions. These are not simply Italian assembled, but largely Italian built, apart from the engine-transmission pack, which is imported from Britain. The second main limb of the Innocenti business is a division making heavy machinery worth £20 millions a year, including sophisticated presses for the motor industry. So the company could offer British Leyland an in-house source of heavv tools as well as a very useful production facility.

The balance of £11 millions in the company's turnover of £57 millions comes from the product best known in this country - the Lambretta scooter and its derivatives. British Leyland has little direct interest here, but a split could cause an awkward marketing problem, because the car outlets normally handle the scooter range as well. Although there have been earlier rumours of a possible takeover during the ten-year association between the two companies , this is the first time both have been willing to confirm that talks are on.

The major problem for British Leyland is that a takeover at the moment offers a rather expensive way of protecting a significant foothold in Europe. The Innocenti family, it is clear, wants to sell its interest for cash, and with British Leyland's equity shares and the Eurobond market in an equally sick state, raising a large sum could present considerable commercial problems.

It seems likely, therefore, that the British bid may be limited to the car division, with IRI joining in as buyer of the heavy machinery plant on the same site. Piaggio, the Vespa firm, is thought in Milan to be a likely buyer of the scooter division, which would rationalise an industry which has been badly hit by Japanese motorcycle competition. However, a split of Innocenti is far from easy to arrange physically, and the family would prefer to sell the company as a unit : a joint British Leyland-IRI takeover offers a further possibility.

It seems likely that the British authorities would back British Leyland in any move it decides to make : the problems of financing a purchase are purely commercial, and no objections are foreseen from the Bank of England, which administers official controls of British direct investment overseas.