Magna Puts in Bid to Buy Chrysler Group from DaimlerChrysler

Could Canada finally have a major automaker of its own? It seems that Canadian auto supplier Magna International Inc. has plans to buy Chrysler Group from DaimlerChrysler, having put in a bid togetherwith a private equity group to purchase the Auburn Hills, Michigan based manufacturer for $4.6 to $4.7 billion, according to a report in Automotive News.

According to Brett Hoselton, an analyst for KeyBanc Capital Markets who revealed the news in a report on March 23, Magna's stake of Chrysler Group would be worth between 20 and 25 percent.

"While MGA views its offer as low and unlikely to prevail, the company also views it as an opportunity to purchase an inexpensive stake in the automaker should the other buyers retreat," wrote Hoselton.

Many analysts didn't expect Magna to place a bid at all, due to the conflicts that willarise from owning a competitor to its supplier customers, and some of these will point to the conservative bid as a sign that Magna is only going through the due diligence in hopes to get a deal that's good enough to justify the potential loss of any current clients or the preemptive decision to unload some of its regular business.

According to Hoselton, Magna is doing a strategic review of its interiors business, which includes "all options including operational improvements or the possibility of selling the business entirely."

Still, with DaimlerChrysler making up 25 percent of Magna's supplier business, it's critical that it finds a way to either hold onto the business if another buyer purchases the automaker, or buy Chrysler Group itself.

"It is imperative that Magna has a full understanding of the situation regarding the future of the Chrysler group," read a statement written by Magna spokeswoman Tracy Fuerst. "Therefore, we continue to review potential alternatives regarding the future of the Chrysler Group. Discussions about this matter are strictly confidential and will not be disclosed publicly, nor will the company comment on speculation related to those discussions."

Bids from rival suitors are expected before month end, and are likely to come from private equity firms Cerberus Capital Management and Blackstone Group.

Recent

Departments