Magna and Opel Ready to Deal?

May 29, 2009

The purchase of Opel reads like a daytime soap opera romance - too many suitors, lots of drama, and a fair amount of threats and protests. But in the end, it looks like Magna will come away with the girl, with a tentative agreement worth $2.1 billion reached today.

The deal will provide emergency funding to get Opel through this bridge period until the German government can secure longer-term financing for the company. It could serve to protect Opel from General Motors' creditors in the U.S., as the American giant is expected to file for Chapter 11 bankruptcy on Monday.

"A framework agreement has been reached. The goal is to work out as many of the details as possible before the meeting with [German Chancellor Angela] Merkel in order to sign a memorandum of understanding today," a source close to the proceedings told Reuters.

The new information puts Fiat's decision to skip talks with Opel earlier today in context. While Fiat had previously sought a deal with Opel, it said today that it would be exposed to too much risk if it had to go forward with the deal. Providing the emergency financing to bridge the period to government loans was the sticking point.

But like any good soap opera, it's not over yet. Fiat CEO Sergio Marchionne says he's still interested in Opel. Whether that means he'll try to steal it away from Magna, or simply try to join in to form an alliance to expand Fiat's already-growing empire is still up in the air.

[CNN Money]

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