* Magna to inject more equity to assume greater risk
* Move could placate remaining German government critics
* Still offers 500 mln eur, but 350 mln to come in cash
* GM's Opel negotiator sees closure by end of September
* RHJ does not feel pressure to sweeten its bid -source
(Adds comments from GM's Opel negotiator John Smith)
By Gernot Heller and Christiaan Hetzner
BERLIN/FRANKFURT, July 28 Canadian auto parts
maker Magna offered to increase the amount of upfront capital
it would invest in Opel as part of a bid for the General
Motors' [GM.UL] European unit, several sources said on
The revised bid leaves the total proposed amount at some
500 million euros ($714 million), but tilts the financing mix
towards an immediate equity injection instead of using
convertible debt for the bulk of the funding.
In a blog entry posted on the company's website on Tuesday,
GM's chief negotiator said he still expected the deal to close
by the end of September, although no preference as yet has been
made for a specific bidder and key points had yet to be
"The bid from RHJ International RHJI.BR is completed, and
would represent a much simpler structure and would be easier to
implement...This represents a reasonable and viable option to
be considered as the very difficult issues around the Magna
negotiations continue to be worked (on)," GM's John Smith
Magna's new offer is expected to silence some of the
critics in the German government that have admonished it for
effectively shifting all of the risk onto German taxpayers, who
will largely finance the deal through billions in loan
Germany's economics minister, Karl-Theodor zu Guttenberg,
has said that European cartel authorities would look at Opel's
ratio of equity to debt as a key criteria for whether a new
owner just served as a fig leaf for a state-sponsored bailout.
"Magna is now offering 350 million euros of its own capital
immediately," said the government source, who is familiar with
talks to find an investor for Opel. "Furthermore, there should
be a 150 million euro convertible bond."
The Canadian company and its consortium partner Sberbank
(SBER.RTS) are competing with RHJ International for Opel. GM
can no longer afford to finance its European carmaker and is
being forced to give up majority control in exchange for
substantial government aid for Opel.
Magna originally wanted to invest just 100 million euros
($142.8 million) of equity capital in Opel in two tranches of
50 million euros along with another 400 million in convertible
debt, banking on overwhelming political support from the four
regional states home to Opel for its bid.
MAGNA THROWS CURVEBALL
"The world is a different place with 350 million. This
proves it was a correct decision to negotiate with two parties
-- otherwise Magna never would have improved its offer," one
source close to the talks said, adding that the only remaining
hurdle for Magna now was reaching an agreement with GM.
Magna's founder and chairman, Frank Stronach, met with GM
Chief Executive Fritz Henderson on Monday in Detroit to discuss
some of the last issues of contention between the two.
The Canadian group's improved offer comes after a
government-sponsored evaluation of the bids by investment
boutique Lazard suggested RHJ had a slight advantage, since it
offered more equity and required substantially fewer loan
Germany has expressed a preference for Magna's bid, while
sources involved in the negotiations say GM favours RHJ's
A person familiar with RHJ's thinking said the
Belgian-based financial investor did not feel Magna's sudden
move now put it under pressure to follow up with a sweetened
Managers at GM have pushed for RHJ's offer since it is an
easier deal with only one party at the table, that is not
interested in a transfer of GM's technology to Russia, and
offers the U.S. carmaker the added bonus of potentially buying
back majority control of Opel in the future.
GM's Smith wrote in his blog that the Magna bid "varied
from the negotiations we had in the previous weeks and
contained elements around intellectual property and our Russian
operations that simply could not be implemented."
Discussions with Magna continue in earnest, he added.
"We remain fully open to working (out) these issues to a
conclusion, but we cannot say when that process will conclude,
other than to say as soon as possible," Smith wrote.
GM's European business said last Thursday it had agreed to
continue detailed talks with Magna and RHJ, making no mention
of third bidder Beijing Automotive (BAIC). The Chinese
carmaker, that sought access to GM's technology, confirmed a
day later that intellectual property issues scuppered its
The endgame of the battle for control of Opel will likely
be played out in the Opel Trust, which has formally owned 65
percent of the carmaker ever since GM entered bankruptcy in
June and must approve any binding deal.
Opel Trust's board is comprised of two GM representatives
and two for Germany, one for Berlin and a delegate for the four
federal states in which Opel has plants. A fifth "neutral"
board member has no vote.
Magna wants to expand Opel's full-scale car assembly
business and forecasts high growth rates, particularly in
Russia, home of its bidding partner, Sberbank.
RHJ aims to shrink production to return Opel to profit and
may be open to selling it back to GM at a later date.
(Additional reporting by Angelika Gruber and Philipp
Halstrick, writing by Paul Carrel, editing by Karen
Foster,Rupert Winchester, Leslie Gevirtz)