Unstructured Finance

Battered car-makers rounding blind corner

AUTOSHOW/(Update: This piece was written, as several commenters have pointed out, before GM clinched a sale of Saab to Spyker on January 26.)

By Quentin Carruthers

(Acquisitions Monthly) Automakers face a demand slump in Europe and the longer-term challenge of addressing climate change. Both pressures are expected to lead to further restructuring, consolidation and M&A activity.

The North American International Auto Show, held each January in Detroit, Michigan, is just coming to an end. Detroit is the hometown of America’s “Big Three” automobile makers – Ford, General Motors, and Chrysler – and the show constitutes one of the most important events in the industry’s calendar.

Touring the floor with a group of her fellow Congressmen was Nancy Pelosi, Speaker of the House of Representatives, who told reporters: “We came to listen, to learn, to observe, to measure, to judge what has happened to the investment that we made.”

US state investment includes US$60bn of government loans to support automotive assemblers, in return for control of GM and a minority stake in Chrysler, both of which came out of Chapter 11 bankruptcy proceedings in mid-2009. A further US$3.5bn has been used to support parts suppliers, and US$3bn to support car retailers.

The afternoon deal: Tiny Spyker wins a car

USA AUTOSHOWIt’s been an auto-fueled day with investors on tenterhooks awaiting  the now announced $400 million Spyker/Saab deal. Although Saab kept the spotlight, there is news from Chrysler, Opel, Porsche, Mitsubishi, Peugeot and Geely’s Volvo.

From Reuters, get the Saab deal wrap up here, along with a Saab factbox, timeline and profile of Spyker’s CEO Victor Muller. Find some additional facts about Spyker from The Swedish Wire here.

The Guardian has a great story on the mystique around the car brand called, “How did it all go wrong for Saab?”, and in a warning before the deal was announced, Fiat and Chrysler Chief Executive Sergio Marchionne said: “Marginal players will continue to be marginalized.”

DealZone Daily

Auto maker General Motors is grappling with the future of its European units Saab and Opel after one sale collapsed and the other was pulled, targeting the bulk of its 9,000 job cuts at Opel’s German factories.

Bookseller Borders UK called in the administrators yesterday, adding its name to a growing list of failed British high street retailers. Administrator MCR is hoping to sell the business, bought by Valco (the private equity arm of turnaround specialist Hilco) in July this year, as a going concern.

Lachlan Murdoch, son of News Corp chief executive Rupert Murdoch, sold some $27.6 million of his shares in his father’s company as he bought 50 percent of Daily Mail & General Trust’s radio operations in Australia.

Next in M&A: the WordPress Hug?

Maybe it’s time to add a new weapon to the old M&A arsenal of poison pills, dawn raids, and white knights — the corporate blog. You could call it the WordPress Hug.

Late on Monday, Cisco’s Ned Hooper used the company’s blog to insist it had offered “a very good price” for Tandberg, after some shareholders of the Norwegian videoconferencing company said the price was too low. (See his full post here.)

The “Driving Conversations” blog of General Motors Europe has also been a source of news on the long-running (and now abandoned) talks to sell Opel, hosting posts from GM’s chief negotiator, John Smith. (See some of his posts on the topic here.)

GM’s Opel Surprise

“You wonder if your chance will ever come or if you’re stuck in square one.”

When I heard about GM keeping its Opel unit, that line from a song by British band Coldplay came to my mind. After all those long nights of paltering on job cuts and money, GM was having a change of heart.

The sale of Opel to a group led by Canadian car parts maker Magna — announced in September — was widely considered a done deal. Turns out, it was less done than more. Citing improving business conditions and the strategic importance of Opel, GM decided it would be better to alienate the German government that provided it with a loan to sweeten the sale of the unit to Magna than to lose the business. GM said it would repay the rest of the 1.5 billion euro ($2.2 billion) bridge loan if Berlin requested. The loan helped save Opel from being sucked into GM’s dip into bankruptcy this year.

Magnum’s Opel

General Motors may soon get the long-delayed green light to sign over carmaker Opel to Canada’s Magna. EU antitrust regulators have no plans to block Magna’s acquisition of GM’s European arm, a European Commission spokesman said in Brussels, easing fears the transaction could run out of gas in debate over German state aid to the mostly German-staffed company.

Magna hopes to conclude the deal within weeks of signing a contract. That should be that, right? Well, hardly. For one thing, Spanish workers at Opel’s plant at Figueruelas have voted to strike in protest at cuts included in the Magna package. And European politicians say GM and the Opel Trust should have the option of reopening the bidding process.

But the jilted other bidder, RHJ, says it is no longer interested in doing a deal, so going back to the auction block is probably a nonstarter. And with European auto titan Volkswagen saying sales will likely stay stalled next year, the political will to get a deal done is about all Opel has going for it right now. The company is poised to run out of cash by mid-January.

The Car Business: Self-loathing and Chinese Takeaways

Nobody hates cars as much as the car industry does these days. The business is crippling some of its biggest players and behold the dearth of industry names queuing up to buy other automakers.

Opel in Germany is being sold yet are Volkswagen, Porsche, BMW or Daimler anywhere to be found? Spot the empty parking lot.

Without the Chinese, auto sector M&A right now is about as exciting as a 1981 Yugo.

Road to fortune or highway to hell?

GM-OPEL/That will ultimately be the question asked about what kind of a future the German carmaker Opel faces.

Parent General Motors said on Thursday that it indeed wanted
to sell a majority stake in the unit to Canadian auto parts
group Magna and Russia’s Sberbank, a decision long favoured by the German government under Chancellor Angela Merkel.

With about two weeks to go until a general election in
Europe’s biggest economy, this would clearly be a political
victory — but the question remains whether it will also be an
economic one.

Deals du Jour

Bharti Airtel will not sweeten its offer for MTN now that exclusive talks between the two have been extended. Instead, the talks are about administrative issues, permissions and a scheme of arrangements, Bharti Chairman Sunil Mittal told the Economic Times. And the fate of Opel hangs in the balance, with General Motors poised to pick a buyer. Its board will address the topic later on Friday, sources told us.

For these and other stories on deals, click here. And for an overview of what other media are saying, have a look at our daily Market Chatter.

Opel and shut case?

Just when the baroque machinations surrounding the sale of GM’s European unit seemed like they couldn’t get any murkier, one bidder has taken on the heroic initiative to announce it has won agreement with GM for a deal. Our interview with Siegfried Wolf, the Co-CEO of Canada’s Magna, had the ring of finality to it, but GM has already said it was in agreement with the other bidder, Belgian private equity firm RHJ. The German government is quiet for now, having already said it supports Magna.

According to Magna, GM management agreed in principle to sell it and Sperbank, its Russian partner, a 55 percent stake in Opel. Shortly after the interview ran, GM helped to keep the waters muddy, saying its board will discuss Opel options once it has a financing plan in hand that European governments will support. It did confirm that Magna and Sberbank had presented GM with a revised draft agreement, which it will review over the next few days. If nothing else, the interview appears to tip the balance a bit, but given all the bumps in the road this deal has hit, investors can be forgiven for wanting to wait for the official word.

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