GM Gets Three Final Opel Bids; Magna’s Stake to Rise

GM Gets Three Final Opel Bids; Magna’s Stake to Rise

July 20 (Bloomberg) -- General Motors Co. received three final offers for its Opel unit in Europe, with Magna International Inc., Germany’s preferred bidder, planning to take a bigger stake from its Russian partner.

RHJ International SA and Beijing Automotive Industry Holding Co. also submitted offers. Magna, the largest Canadian car-parts manufacturer, would buy 27.5 percent of Opel compared with 20 percent in an earlier proposal, said a spokesman at the company’s European headquarters in Oberwaltersdorf, Austria.

The German government, which agreed to provide 1.5 billion euros ($2.1 billion) in short-term loans for Opel’s sale, is pushing GM to pick Magna as the winner, two people familiar with the situation have said. Germany selected Magna as preferred bidder on May 30. Detroit-based GM, seeking to salvage its European operations after emerging from bankruptcy, set today as the deadline for taking final offers for Opel, which includes the Vauxhall brand in the U.K.

“The final bids will now be analyzed and compared by GM,” GM Europe said in a statement. “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.”

Aurora, Ontario-based Magna and Brussels-based investor RHJ are “probably the frontrunners,” Nick Reilly, GM’s Asia- Pacific chief, said in an interview last week. Reilly will take over all of GM’s operations outside of North America next month.

Russian Partner

Under Magna’s revised proposal, partner OAO Sberbank would own 27.5 percent instead of 35 percent, the Magna spokesman said. The initial offer would have given GM and Sberbank matching 35 percent stakes, with the remaining 10 percent held by employees at Ruesselsheim, Germany-based Opel. Magna said today that the new bid doesn’t change the proposed GM and worker holdings.

German Deputy Economy Minister Jochen Homann said on July 16 that, while Magna “still has an edge” in its talks with GM, RHJ is “catching up in the process.” The Magna team includes OAO GAZ, Russian billionaire Oleg Deripaska’s vehicle maker.

Bo Andersson, a former GM vice president, was elected chairman of the board at GAZ, Deripaska said in a statement.

Arnaud Denis, a spokesman for RHJ, and a spokesman for Magna declined to comment. Wang Hong, a Beijing Auto spokesman, couldn’t be reached for comment outside office hours.

Fiat SpA, Italy’s largest carmaker, said last month that it wouldn’t improve its offer for Opel after Germany’s May 30 decision. Fiat’s position is “unchanged,” a spokesman for the Turin-based automaker said by phone today.

Russian Issues

GM will present the Opel trust board with preliminary analysis by July 22, one of the people have said. GM intends to have a recommendation by the following week to present to its board of directors and the U.S. Treasury. The U.S. government controls 60.1 percent of GM after it emerged from a U.S.-backed bankruptcy on July 10.

The recommendation, if approved, could come back to the Opel trust board for review that same week, the person said. The trust board must approve any bid before a deal is signed.

The primary issues remaining with Magna have to do with the involvement of Russia, people familiar have said.

Sberbank has proposed a direct investment in Opel’s Russian operations that would dilute GM’s ownership of the venture there more than originally agreed, said one person. Also, the proposal values Opel’s operations at 170 million euros, a fraction of GM’s valuation, the person said, without giving a figure.

Loan Guarantees

Most issues involving GM’s intellectual property have now been resolved, with one possible disagreement over the use of the technology by Sberbank, according to the person.

The Magna-Sberbank partnership would invest 500 million euros to 700 million euros in Opel, the Magna spokesman said today. The proposal calls for 4.5 billion euros in loan guarantees from European governments.

Magna plans to observe “strict separation” between its auto-parts business and Opel, with no managers sharing responsibilities at the two divisions and the German carmaker operating independently in close cooperation with GM, the spokesman said.

RHJ’s plan envisages an investment of about 275 million euros in Opel and state loan guarantees of about 3.8 billion euros in exchange for a 50.1 percent stake. GM could own about 39.9 percent, with the rest going to employees.

RHJ has automotive assets including some former holdings of Ripplewood Holdings LLC, the New York-based private-equity firm founded by Timothy Collins.

Beijing Automotive offered 660 million euros for a 51 percent stake of Opel, leaving GM with a 49 percent holding. Beijing Automotive’s bid would require 2.64 billion euros in government loan guarantees.

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