Frankfurt — Magna International Inc.'s board of directors is scheduled to approve on Tuesday a business plan for the acquisition of German car maker Adam Opel GmbH, two sources familiar with the matter said on Thursday.
The Canadian auto parts supplier and Opel parent General Motors Corp. have already clarified most of the major issues in weeks of tough negotiations and they expect to resolve the last few issues holding up the takeover by July 7, the sources said.
The business plan would serve as the basis for talks with lenders like Commerzbank AG, which would finance the takeover, helped by an estimated €3-billion ($4.23-billion U.S.) in European state loan guarantees, they added.
One person involved in the deal said a lengthy meeting last Thursday between GM chief executive officer Fritz Henderson, lead GM negotiator John Smith, Magna co-CEO Siegfried Wolf and Magna chief operating officer Herbert Demel clarified many of the major points still open.
“They came significantly closer to one another in the key points,” the source said.
“On July 7 there is a board meeting at Magna. They then have to have the business plan that they worked out approved, but that should be a formal matter,” that person added.
Another source close to the talks said: “The only remaining issue is whether ‘New Opel' gets the sales distribution rights to GM's Chevrolet brand for the Russian market, but a solution should be achievable here.”
Majority control over Opel, which also includes plants in Britain and Spain, is being sold as a precondition to state aid for the German car maker now that insolvent GM can no longer afford to finance its foreign subsidiary.
GM and the German government have piled pressure on Magna by talking up rival interest from Chinese state-owned Beijing Automotive and Belgian investment firm RHJ International in the run-up to July 15, when Magna wants to be able to sign a deal.
That would cap a process started in late May when Berlin – worried about thousands of job losses before September elections – provided €1.5-billion in financing to keep a ring-fenced Opel alive until it could bring in an outside investor.
Analysts believe the only way Magna's acquisition of Opel would collapse is if Magna were to bow out of the talks, forcing GM to then negotiate with another bidder like BAIC.
The Chinese car maker is working together with advisers Deutsche Bank AG and PricewaterhouseCoopers LLC on the details of a bid it plans to submit by July 15 after examining Opel's data room last week, according to another source.
The U.S. car maker would likely retain the formal appearances of a bidding process by accepting further offers, only then to choose Magna as the winner.
In Moscow, Magna's Russian consortium partner Sberbank – together they want to take a 55 per cent stake in Opel – said that BAIC, RHJ and Italian car maker Fiat SpA were all effectively out of the race.
“I do not see any serious competition. The choice has been made and the question now is of how to structure the deal,” CEO German Gref told reporters.
The Kremlin-backed lender has signalled its willingness to sell its planned 35 per cent stake to a Russian auto maker, possibly Magna's industrial partner GAZ, but GM is expected to receive a right to veto a partner.
Once final financing is lined up, Magna and GM could draft a contract that could be signed by July 15. This would likely be legally binding with assurances that any party that terminates the deal would have to pay a so-called break fee.
GM Europe, Magna and BAIC declined comment.
Analysts say BAIC is keen to expand out of its domestic market and build Opel into a global brand, but it has so far provided scant details of its intentions. Its initial offer to investment bankers running the deal was just two pages long.
One source close to BAIC said it entered the process comparatively late because GM was reluctant to involve it in the process at all, as the U.S. car maker does not want to create additional competition in China from its erstwhile Opel brand.
© The Globe and Mail
