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RHJ And Magna Face Off in Bid For Opel PDF Print E-mail
Friday, 17 July 2009

Belgium-based investor RHJ International is offering 275 million euros ($388 million) for a majority stake in General Motors' Opel business in a last-ditch bid to beat out early frontrunner Magna.

RHJ's non-binding offer document, entitled 'Project Beam' and obtained by Reuters on Friday, foresees production cutbacks and pay cuts for staff at the German carmaker, which GM is selling amid a radical slimming programme to restore profitability.

With the plan, RHJ hopes to outmanoeuvre Canadian auto parts group Magna International Inc, which secured the favorite's tag when it signed a memorandum of understanding with GM to acquire the Ruesselsheim-based group nearly two months ago.

Magna, backed by Russia's Sberbank, wants to use Opel to make an aggressive push into the Russian market.

RHJ plans a more traditional restructuring of Opel's European operations, which stretch from Germany to Belgium, Britain, Poland and Spain.

The pursuit of Opel is part of a broader consolidation of the car sector in Germany and beyond which was brought on by the global economic crisis.

Because Opel has been placed under the ownership of a trustee in which both GM and the German government have a stake, the process of deciding a suitor has become more complex.

Speaking at a news conference with Russian President Dmitry Medvedev near Munich on Thursday, German Chancellor Angela Merkel voiced support for the Magna plan.

Her spokesman Ulrich Wilhelm went even further on Friday, saying Berlin had a preference for the Canadian group's concept, which is also backed by the four German states where Opel has plants and by the carmaker's unions.

Still, some elements within Germany's "grand coalition" government appear frustrated that Magna is not contributing more cash and sources close to the talks have also told Reuters that elements within GM view the RHJ bid favourably.


According to the offer document, the RHJ plan requires 3.8 billion euros in government guarantees, less than the 4.5 billion Magna is demanding.

RHJ would contribute 175 million euros at the closing of a deal for Opel and an additional 100 million at the end of 2012, good for a narrow majority stake of 50.1 percent.

Under the plan, GM would keep a 39.9 percent stake in Opel and employees would hold 10 percent in exchange for agreeing to contribute between 250 million euros and 300 million in savings per year through job and pay cuts.

RHJ would reduce Opel's headcount by 9,900, shutting a plant in Antwerp, Belgium in March 2010 and downsizing the carmaker's four German plants, but keeping all of them open.

It projects that net sales would rise from 16.9 billion euros in 2009 to 23.6 billion by 2014, with EBITDA pushing up to 2.5 billion by the same date.

The Magna offer, which envisions about 10,000 job cuts across Europe, would also avoid outright plant closures in Germany.

Beijing Automotive (BAIC) is also pursuing Opel, but Merkel's spokesman said on Friday that talks with the Chinese group were not as advanced.

"Both Magna and (RHJ) have said that they will be able to submit offers that are ready to be signed in the coming days," said Wilhelm. "Other interested parties are not at this stage."


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