The takeover twist in Jaguar's tail

DAILY EXPRESS, By Trevor Webster

Sir John Egan's Jaguar car group, which was one of Britain's great export and privatisation success stories of the early 1980's, is driving in bottom gear in the City. The shares have more than halved from a peak of 635p two years ago and would be much lower but for strong hopes of a takeover from, a German or American motor giant.

Both the company's and Sir John's haloes have slipped as the luxury car company has hit a three year run of falling profits, due to a weak dollar, growing competition, labour unrest and falling American sales. Jaguar's troubles piled up yesterday when Japan's Toyota car giant launched its new luxury model in America at prices one-third less than its European competitors and Sir John announced that his company's crucial American sales were down almost 10 per cent at 20, 727 cars last year.

December sales in the U.S crashed 28 per cent. Analysts are now warning of a dividend cut as 1988 profit expectations have more than halved from £97 million to around £43 million . And they forecast a further fall in profits this year to £30 million. The shares bounced up to 270p yesterday on the dollar's strength. But the rise in the pound over the past two years has crippled profitability . For every cent the pound gains against the dollar Jaguar loses £3 million of profit.

On analysts forecasts of profits, Jaguar is selling at three times the rating of the average share. The Government's "golden" takeover-blocking share lapses at the end of 1990. Hopes are high that a German giant like Volkswagen or Daimler will bid. Or that Ford which is keen to make acquisitions is planning to take a 15 per cent in anticipation of bidding us soon as it is allowed. But the Americans were badly rattled by the patriotic uproar when they tried to buy Land-Rover in 1986.

Both Jaguar's share price and the risks look high. The company is now locked in a crucial wages battle. Workers ballot next week on a two-year offer of a 4 per cent annual rise. And labour troubles can bring deterioting product quality, reduced customer confidence and put off a potential bidder. Amerlcan investors too are losing their enthusiasm for Jaguar. They once owned 52 per cent of the shares. Now they have only 20 per cent. U.S. analysts badly overestimated prospects. And when they get it wrong they quickly switch off. Many believe, however, that the shares win support at 20p. At a value of £500 million, Jaguar is a handsome toy that someone will pay a handsome price for .