Global Economics

Private Equity Firm Pursues GM Europe


Belgian investor RHJ dropped out of the bidding for Opel and Vauxhall when Magna got the nod in May, but now it's back with a potentially winning plan

RHJ International is back in the race for GM Europe (GME), pushing the number of serious bidders back up to three. Takeover talks with GME – which includes Vauxhall in the UK and Opel in Germany – have been taking place over a number of weeks and are "at an advanced stage", the private equity group said yesterday.

Until recently, the car parts manufacturer Magna (MGA) was the front runner to rescue the European arm of the bankrupt Detroit giant. The Canadian group, backed by Russia's state-owned Sberbank, was selected as preferred bidder in May, at the same time as Fiat (FIA.MI) and RHJ both walked away from the discussions.

But discussions with Magna have proved more difficult than expected in recent weeks. Magna is offering €700m (£607m) for 55 per cent of GME, of which Sberbank would hold 35 per cent, while GM in the US would retain 35 per cent. But agreement has been stymied by differences with the parent company over intellectual property issues and distribution rights in Russia.

In late June, China's Beijing Automotive Industry Corporation (BAIC) threw its hat into the ring with a €660m proposal that includes plans for a $2bn Opel factory and 400-strong dealership network in China.

The GME sale talks have a significant political dimension. Whichever company buys GME, it will need to make significant capacity cuts to bring the company's output in line with reduced demand. And any deal will rely on sweeteners from the German and British governments, both of which are trying to use the payments as leverage to secure local jobs. Speculation is rife as to which bid favours job cuts in which area.

It is understood that RHJ's strengthened bid position rests on a revised offer which targets €3.8bn from Berlin, compared with the €4.5bn requested by Magna. The German press is also reporting that RHJ plans to cut fewer than 10,000 of Opel's 52,000 staff, and keep all its factories open, whereas Magna was understood to have more stringent cuts in mind.

Meanwhile, reports of BAIC's plans also suggest there will be little impact on Vauxhall's 5,000-strong UK workforce, although some analysts claim a Chinese buyer would simply move all production to China. Lord Mandelson, the Business Secretary, has said he is committed to retaining jobs at the factories in Ellesmere Port and Luton.

RHJ already has several investments in car parts makers, including stakes in Asahi Tec in Japan and Honsel in Germany. It is linked with Ripplewood, the US buyout group, through Timothy Collins, who founded and now runs both companies.

Provided by The Independent—from London, for Independent minds

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