Stronach confirms joint bid talks for Chrysler
From:
http://www.theglobeandmail.com/servlet/story/LAC.20070412.RONEX12/TPStory/Business
APRIL 12, 2007
Stronach confirms joint bid talks for Chrysler
Eyes 'big' tab, even with Onex backing
GREG KEENAN AND BOYD ERMAN
It will take a "big sum" to buy auto maker Chrysler, and Magna International Inc. is negotiating with Onex Corp. to help finance a purchase, Magna founder and chairman Frank Stronach confirmed yesterday.
"It's a big sum we would allocate," Mr. Stronach said, although he refused to reveal the size of Magna's bid. "We would make a big commitment."
The Canadian auto parts giant is in talks with Gerald Schwartz's Onex, a buyout firm, about working on a bid, Mr. Stronach said.
The two high-ranking business figures have known each other for years and speak occasionally, Mr. Stronach said. Heather Reisman, who is an Onex director and Mr. Schwartz's wife, also once sat on the Magna board.
"We'd like to have some partners and Gerry would be a good partner," Mr. Stronach said in a telephone interview from Austria, where Magna has operations.
Onex officials declined to comment on the plan, which would see the two Canadian companies buy all of Chrysler.
Magna, with its experience running factories, would help to streamline Chrysler's operations and Onex would focus on the company's finance arm, sources familiar with situation have told The Globe and Mail.
Whatever the two companies are planning, they will have to work quickly because the auction of Chrysler is moving into its next phase.
Bidders for Chrysler are scheduled to make pitches this week to DaimlerChrysler, which effectively put the money-losing auto maker up for sale in February by announcing that all options for the future of the company were under consideration.
That announcement shocked the industry because it came after years of the company steadfastly defending the 1998 merger of Chrysler Corp. and Daimler-Benz AG in what then-Daimler chairman Juergen Schrempp billed as an automotive marriage made in heaven.
Chrysler is expected to fetch between $5-billion (U.S.) and $8-billion, but just as important as the price will be the ability of a buyer to make a deal with the beleaguered auto maker's unionized work force to cut costs. Any purchaser must also find a way to finance as much as $20-billion in legacy costs for pensions and employee health care, perhaps by convincing DaimlerChrysler to share responsibility.
So far the only bid that's been publicly disclosed is a $4.5-billion offer from Tracinda Corp., an investment company headed by gambling mogul and auto industry gadfly Kirk Kerkorian, who made a $22.5-billion hostile takeover offer for Chrysler in 1995. His recent $4.5-billion offer may set a floor price for the division, which posted an operating loss of $1.5-billion last year.
Private equity firms Blackstone Group LP and Cerberus Capital Management LP are also in the running.
"It sounds like Onex would be coming in only for the financial end," said Canadian Auto Workers president Buzz Hargrove, who finds the prospect of Magna taking over Chrysler more palatable than private equity players.
Mr. Hargrove said he has not spoken with Mr. Schwartz, although he did meet Mr. Stronach several weeks ago to discuss Magna's plans.
The union leader and Mr. Schwartz worked together in Mr. Schwartz's unsuccessful bid to buy and merge Air Canada and Canadian Airlines International in 1999.
Onex has also had good relations with the United Auto Workers, which represents employees at Onex's Spirit AeroSystems unit.
Bids for Chrysler are likely to be made in cash, which is not in short supply at either Magna or Onex.
Onex is debt-free and has about $1.5-billion (Canadian) of cash on its books, as well as money from a $3.45-billion (U.S.) buyout fund the company runs called Onex Partners II. Onex could also bring in more money from the existing investors in its private equity funds.
Magna has $1.9-billion of cash and also has no debt, giving it room on its balance sheet to borrow billions more. Magna has in past avoided borrowing, but as Mr. Stronach reiterated yesterday, there is a lot at stake for the company.
About 15 per cent of the parts company's annual sales of $24.2-billion are to Chrysler, the No. 3 Detroit auto maker. Even so, Mr. Stronach signalled he won't overpay or stretch Magna's resources too far.
"I wouldn't jeopardize Magna," Mr. Stronach said.
-J
From:
http://www.theglobeandmail.com/servlet/story/LAC.20070412.RONEX12/TPStory/Business
APRIL 12, 2007
Stronach confirms joint bid talks for Chrysler
Eyes 'big' tab, even with Onex backing
GREG KEENAN AND BOYD ERMAN
It will take a "big sum" to buy auto maker Chrysler, and Magna International Inc. is negotiating with Onex Corp. to help finance a purchase, Magna founder and chairman Frank Stronach confirmed yesterday.
"It's a big sum we would allocate," Mr. Stronach said, although he refused to reveal the size of Magna's bid. "We would make a big commitment."
The Canadian auto parts giant is in talks with Gerald Schwartz's Onex, a buyout firm, about working on a bid, Mr. Stronach said.
The two high-ranking business figures have known each other for years and speak occasionally, Mr. Stronach said. Heather Reisman, who is an Onex director and Mr. Schwartz's wife, also once sat on the Magna board.
"We'd like to have some partners and Gerry would be a good partner," Mr. Stronach said in a telephone interview from Austria, where Magna has operations.
Onex officials declined to comment on the plan, which would see the two Canadian companies buy all of Chrysler.
Magna, with its experience running factories, would help to streamline Chrysler's operations and Onex would focus on the company's finance arm, sources familiar with situation have told The Globe and Mail.
Whatever the two companies are planning, they will have to work quickly because the auction of Chrysler is moving into its next phase.
Bidders for Chrysler are scheduled to make pitches this week to DaimlerChrysler, which effectively put the money-losing auto maker up for sale in February by announcing that all options for the future of the company were under consideration.
That announcement shocked the industry because it came after years of the company steadfastly defending the 1998 merger of Chrysler Corp. and Daimler-Benz AG in what then-Daimler chairman Juergen Schrempp billed as an automotive marriage made in heaven.
Chrysler is expected to fetch between $5-billion (U.S.) and $8-billion, but just as important as the price will be the ability of a buyer to make a deal with the beleaguered auto maker's unionized work force to cut costs. Any purchaser must also find a way to finance as much as $20-billion in legacy costs for pensions and employee health care, perhaps by convincing DaimlerChrysler to share responsibility.
So far the only bid that's been publicly disclosed is a $4.5-billion offer from Tracinda Corp., an investment company headed by gambling mogul and auto industry gadfly Kirk Kerkorian, who made a $22.5-billion hostile takeover offer for Chrysler in 1995. His recent $4.5-billion offer may set a floor price for the division, which posted an operating loss of $1.5-billion last year.
Private equity firms Blackstone Group LP and Cerberus Capital Management LP are also in the running.
"It sounds like Onex would be coming in only for the financial end," said Canadian Auto Workers president Buzz Hargrove, who finds the prospect of Magna taking over Chrysler more palatable than private equity players.
Mr. Hargrove said he has not spoken with Mr. Schwartz, although he did meet Mr. Stronach several weeks ago to discuss Magna's plans.
The union leader and Mr. Schwartz worked together in Mr. Schwartz's unsuccessful bid to buy and merge Air Canada and Canadian Airlines International in 1999.
Onex has also had good relations with the United Auto Workers, which represents employees at Onex's Spirit AeroSystems unit.
Bids for Chrysler are likely to be made in cash, which is not in short supply at either Magna or Onex.
Onex is debt-free and has about $1.5-billion (Canadian) of cash on its books, as well as money from a $3.45-billion (U.S.) buyout fund the company runs called Onex Partners II. Onex could also bring in more money from the existing investors in its private equity funds.
Magna has $1.9-billion of cash and also has no debt, giving it room on its balance sheet to borrow billions more. Magna has in past avoided borrowing, but as Mr. Stronach reiterated yesterday, there is a lot at stake for the company.
About 15 per cent of the parts company's annual sales of $24.2-billion are to Chrysler, the No. 3 Detroit auto maker. Even so, Mr. Stronach signalled he won't overpay or stretch Magna's resources too far.
"I wouldn't jeopardize Magna," Mr. Stronach said.
-J
