RHJ and Magna face off in bid for Opel

BERLIN (Reuters) - 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 early frontrunner Magna.

Employees arrive at the Opel assembly plant in Antwerp June 15, 2009. REUTERS/Thierry Roge

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 carmaker, which GM is selling amid a slimming programme to restore profitability.

With the plan, RHJ hopes to outmaneuver 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 given added impetus 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 plan, 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 Magna is not contributing more cash and sources close to the talks have also told Reuters elements within GM view the RHJ bid favorably.

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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 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 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 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.”

State and trade union leaders reiterated their support for the Magna deal on Friday, with Thuringia premier Dieter Althaus saying he expected Magna to take over Opel soon.

“I still expect the Magna plan to be accepted in the negotiations,” Althaus told Reuters. “I hope a conclusion can still be reached in July.”

Opel union leader Klaus Franz said the RHJ plan was “a riddle wrapped up in an enigma” and it was unclear how the Belgian-based investor planned to finance the takeover.

“What we need is a proper industrial partner with an interest in long-term business and the future of the company,” Franz told Reuters.

(Additional reporting by Rene Wagner and Angelika Gruber; Writing by Noah Barkin; Editing by David Holmes and John Stonestreet)

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