RHJ Will Sweeten Bid for GM's European Unit

[Z-06]

[source: Wall Street Journal]

RHJ Will Sweeten Bid for GM's European Unit

By DANA CIMILLUCA

Belgian investment firm RHJ International plans to sweeten its bid for General Motors Co.'s European unit in an effort to overcome German government opposition to its bid.

RHJ is developing a revised bid for GM's Opel/Vauxhall operations that would lower the amount of German taxpayer-funded loan guarantees required from €3.8 billion ($5.38 billion) to as little as €3.6 billion, people familiar with the matter said Friday. That would be €900 million below the amount of state aid envisioned in a rival offer from car-parts maker Magna International Inc.

RHJ appears to be pressing recent signs of momentum in its bidding war with Magna and its partner, Russian lender Sberbank, for GM's German and U.K. operations. Although Magna's offer has widespread support in Germany, GM appears to prefer RHJ's offer. GM's lead negotiator on the deal said in a Blog post Thursday that RHJ's offer is simpler and GM and Magna still have a host of issues to work through.

A deal with Magna and Sberbank poses risks for GM that a deal with RHJ would not. Magna supplies parts to GM rivals and plans to partner with Russian automaker OAO GAZ if it wins the auction. GM is concerned that its intellectual property would leak through Magna.

Magna on Friday said it would create a "firewall" to keep trade secrets of its customers safe should its Opel bid succeed.

As part of any sweetened offer, RHJ could boost its €275 million equity component, one of the people said. The proposal also envisions the elimination of 10,000 jobs.

With the auction dragging out amid the apparent impasse between GM and Germany, the possibility is growing that a definitive agreement with one party won't be struck before national parliamentary elections are held Sept. 27 in Germany.

[FUTURE_OF_GM]

Either sell to RHJ with a buyback provision or take the damn company into Bankruptcy and get rid of Germany altogether.

[ZL-1]

If this deal remains stuck until after the German election (which IIRC is in September), the final deal can be RHJ buying a stake in Opel with GM holding on to a call option for that stake... I have a feeling GM (and maybe the German government as well) is holding back on purpose, until the election fever in Germany goes away...

Edited August 8, 2009 by ZL-1

[Oracle of Delphi]

If this deal remains stuck until after the German election (which IIRC is in September), the final deal can be RHJ buying a stake in Opel with GM holding on to a call option for that stake... I have a feeling GM (and maybe the German government as well) is holding back on purpose, until the election fever in Germany goes away...

You are correct Sir, the election is in September of this year ...

[NINETY EIGHT REGENCY]

Some how, GM is not going to give Opel/Vauxhall away. Some how they will get ownership back or somehow keep it with or without the Germans help. This call comes to how you play the game an politics.