RHJ plays cool hand in Opel bidding

September 2, 2009

GERMANY/RHJ International¬†is playing a canny hand in the political poker match that is the sale of GM’s Opel. The Belgian financial investment house is keeping itself in the game by steadily upping the stakes, increasing the pressure on Berlin to take its bid seriously.

While the German government has so far thrown its considerable backing behind a rival offer for Opel spearheaded by Canadian car parts maker Magna, it has yet to force GM into a deal.

This is in no small part thanks to RHJ’s willingness to play a tough hand. After scrutinising Opel’s books, the investment firm on Wednesday increased the cash on offer for a 50.1 percent stake in Opel to 300 million euros and cut the amount it is asking for in state aid to tide Opel over for the next few years.

RHJ’s improved offer makes it considerably harder for German Chancellor Angela Merkel to justify pushing for a decision on the Opel sale ahead of the election on September 27.

Berlin will also find it increasingly hard to justify backing Magna’s bid and the 4.5 billion euros in state guarantees that it requires, given that RHJ now says it needs just 3.2 billion euros in state guarantees and would repay these by 2013, a year earlier than originally thought.

The revised bid also plays into GM’s hands, giving the automaker an excuse to postpone making its recommendation.

GM prefers the RHJ offer because it will retain a larger stake in Opel and will not have to share know-how with Magna and its Russian backers Sberbank and carmaker GAZ. Its resistance to Magna has proved a headache for Merkel and her government in the run up to the election.

Since GM will need German government support regardless of what happens in the future, it probably doesn’t want to antagonise or embarrass Merkel any more than it has done already, since it may well have to work with her government in the future.

The number of jobs on the line in Europe — some 10,000 — is the same for both bids, although Magna says only a quarter of these would be in Germany. Berlin fears far more would be cut at German plants under the RHJ proposal, which is presumably why the Economy Ministry says it still favours Magna.

If, as seems increasingly likely, the Opel sale is not resolved before the end of the month, the new German government will have to choose between Magna, which would save German jobs, or RHJ, which would save it money. Without a looming election, backing RHJ may yet be on the cards.

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