MercoPress. South Atlantic News Agency

Agreement in principle to buy 55% of GM Opel and Vauxhall

Canada’s Magna and Russia’s Sberbank presented a 600 page long offer.

Magna and its Russian partner Sberbank have reached agreement in principle with General Motors management over a contract to buy 55% of GM's European unit Opel, Magna's co-CEO Siegfried Wolf told reporters.

The boards of directors of GM and Canadian automotive group Magna still need to approve a deal before trustees who control 65% of Opel and its British sister brand Vauxhall could give their final consent, he said.

“At 4:30 this morning Austrian time an agreement on all issues was reached at a management level between Magna, Sberbank and General Motors” Wolf said in an interview, adding “one change or the other” was made in its over 600-page-long offer.

“We submitted a copy of a final contract that can be signed and implemented. I don't want to be overly optimistic -- and the contract will certainly be examined in all its aspects -- but roughly speaking there are no unresolved issues with management any more.”

The agreement does not necessarily mean that competing Opel bidder RHJ International is out of the running, though, since the Belgian private equity firm has also reached an accord with GM's chief negotiator. While Magna plans to expand Opel reach to return to profitability, RHJ aims to shrink Opel.

“We are still very much in the race,” an RHJ spokesman said.

After weeks of hard bargaining, Wolf said his consortium was able to iron out the last details such as access to GM's technology or which markets are open to the new Opel.

“Opel would have the freedom to decide where products will be designed and engineered. It would have a say whether certain things can be developed independently without having to pay royalties, such as engines or transmissions designed for specific applications” the Magna co-CEO said.

Magna's Russian industrial partner, GAZ, would also have access to GM's intellectual property and could buy Sberbank's 27.5% stake in Opel.

“There is no lock-up period in which Sberbank has to hold its stake in 'NewOpel' for a minimum amount of time but there is a very clear process that requires GM's approval if it were sold to anyone other than GAZ or Russian state bank VEB,” Wolf said.

In a compromise, Magna will not take a direct financial interest in GM's Russian business.

Both sides agreed that Opel vehicles cannot be sold in the United States or in Korea, where Chevrolet-maker GM Daewoo is based. Opel is also barred from entering Canada for two years.