ONE of East Lancashire's biggest employers, Lucas Industries, today confirmed it is in talks which could lead to a £3 billion merger.

The potential deal with the Varity Corporation of the US would make the firm's factories in Burnley and Accrington part of one of the world's largest motor component manufacturers.

Lucas today said it was exploring a "potential strategic combination of businesses" but stressed the talks were preliminary and may not lead to any agreement.

But shares in the group rose sharply on the news of the talks and industry observers believe a full scale £3 billion merger is on the cards. Burnley MP Peter Pike said if a merger did go ahead he would be "most anxious" to see jobs in East Lancashire protected.

"I met with Lucas management last week for a routine briefing and nothing was mentioned about this although there have been rumours for some time," said Mr Pike.

"I would prefer to see a British owned multi-national rather than be part of an American group but if a merger was to go ahead I would be seeking a meeting with managers as soon as possible."

Both the UK company, based in Solihull, West Midlands, and Varity's Kelsey-Hayes subsidiary are powerful players in the supply of vehicle braking systems and today's short statement said the discussions included their braking operations.

Lucas employs almost 2,000 people at its aerospace and car components sites in Burnley and the Lucas Rists wiring systems plant in Accrington.

Earlier this year George Simpson, chief executive of Lucas, said that group would need a partner to achieve its aim of becoming of the world's top 10 automotive components and suppliers.

This week Lucas Aerospace announced a deal expected to be worth around £33 million with Ford to manufacture fuel containers at its Burnley factory.

Converted for the new archive on 14 July 2000. Some images and formatting may have been lost in the conversion.