Financial Regulatory Forum

GM says studying three bids for Opel

By Reuters Staff
July 20, 2009

Opel in GermanyBy Christiaan Hetzner and Angelika Gruber
FRANKFURT, July 20 (Reuters) – General Motors (GM) said on Monday that it had received three binding takeover offers for carmaker Opel that it would consider along with Germany and other European countries that would be affected by the deal. In a surprise move, the once heavily favoured consortium of Magna and Sberbank changed its plans at the last minute and agreed that they would evenly split a stake in Opel, in a concession to critics, a source with knowledge of the matter told Reuters.
“The final bids as well as GM’s preliminary findings will then be reviewed with the German and other impacted governments, the EU Commission and the Opel/Vauxhall Trust Board,” GM Europe said in a statement released after the deadline for submissions, without naming the bidders.
Berlin is expected to have a large say in the decision, since it would provide the bulk of up to 4.5 billion euros ($6.4 billion) in expected loan guarantees for Opel.
Earlier, Magna and Brussels-based private equity firm RHJ International said they would submit final bids, while a source familiar with the matter told Reuters that China’s Beijing Automotive (BAIC) also delivered a binding offer for Opel and its UK sister brand Vauxhall.
Magna and Russian partner Sberbank now aim to each take a 27.5 percent stake in Opel. Magna, a auto parts maker from Aurora, Canada, originally planned to take just 20 percent, with the Kremlin-backed lender holding the remaining 35 percent.
“It’s a compromise to those people that wanted more Magna in the consortium,” the person with knowledge of the matter said.
The change could help soothe concerns in Germany over the the potential influence of the Russian bank, which weeks ago began to talk about selling the possible stakeholding in Opel to a domestic carmaker.
A debilitating stalemate between GM and Germany could be emerging over their differing preferences for the two competing bids, in which RHJ foresees shrinking Opel’s production footprint to a more manageable level while Magna targets growth in the dynamic, but volatile, Russian market.
“Then (if there is disagreement between GM and Germany) we naturally have a problem and it becomes really complicated,” said a source familiar with the thinking of Opel’s trustees.
The trustees must formally approve any sale, and Germany and GM are evenly represented in the group.
Magna wants to convince the German federal and state governments that its plan best guarantees Opel its long-term independence from GM and ensures the European carmaker can decide for itself on issues including where it would develop new vehicle architectures or key modules and components.
Before approving the offer, Magna’s board called explicitly for a legally separate holding to manage its stake in Opel in order to head off concerns that know-how developed together with rival carmakers could end up being intentionally leaked to Opel.

LABOUR OPPOSITION
RHJ, meanwhile, said in a letter to Premier Juergen Ruettgers of North Rhine-Westphalia, home to Opel’s Bochum plant, that while it would eliminate 3.900 jobs by 2014, including 2,200 in his state, it did not foresee any compulsory layoffs in Germany.
GM needs to give up a majority stake in Opel in order for the Ruesselsheim-based carmaker to qualify for billions in state aid, but a faction within GM clearly favours a deal with RHJ that could see the U.S. company reacquiring its lost holding when RHJ exits its investment at a later date.
RHJ, a Belgian-listed company that was originally called Ripplewood Holdings Japan and which still has loose ties to the U.S. private equity firm, confirmed on Monday that it would submit a “compelling” offer. The latest plans indicated that it would offer 275 million euros in equity for a 50.1 percent stake.
Magna stuck to its offer of 100 million euros in cash and another 400 million in loans to Opel convertible into equity — likely split up evenly with consortium partner Sberbank.
Although Sberbank would be expected to pool its votes with Magna to ensure majority control, GM would technically remain the largest single shareholder with a 35 percent stake. Opel staff would receive the other 10 percent as under RHJ’s plan.
Opel labour leader and deputy chairman Klaus Franz and powerful German union IG Metall are mobilising opposition against RHJ’s offer.
Unlike Magna, the Belgian firm has not visited a single Opel plant to conduct their own analysis and is basing its concept solely on GM’s restructuring plan, Franz said.
“A job reduction of about 500 engineers is planned which could lead to the relocation of one major Opel European project to the U.S. We are also endangered by losing capability and responsibility in Powertrain [engines and transmissions],” Franz said in a letter to staff that was seen by Reuters.
“Contrary to that Magna is planning additional models and a new ‘A’ (small car) architecture.”
Franz told Reuters that GM wants also to claim licensing fees for example on development work for a fuel-saving dual clutch transmission although GM doesn’t offer the technology.
The labour leader, who believes GM would run things under a deal with RHJ, played a critical role in scuppering any political support for Fiat’s Opel bid and has thrown his entire weight and credibility behind Magna.
To see a Factbox on the bids, please click.

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