Issue: Jan 2010


Eleventh-Hour Bids Submitted for Saab; GM Board to Meet



As GM's deadline for bids for the Saab brand passed, it would appear that the U.S. automaker may have several bids to consider

by IHS Global Insight Perspective

Significance

Following the closing of bidding for the Saab brand, Spyker has said it has made a renewed bid for the Swedish automaker, while two further bidders have been reported in the media.

Implications

GM's board will now meet today to consider the future of the brand, and whether any of the applications may halt the winding down process.

Outlook

Despite the familiarity of Spyker in the bidding process, and the possible strength of the Genii Capital bid, each come with their own possible issues which could see it decide to continue to scale down the business as previously planned.

Following the closure of GM's deadline to receive bids for Saab (yesterday), at least two definite bids have been submitted, while reports suggest that one other proposal may have been sent to GM for consideration. Dutch sports-car manufacturer Spyker Cars has confirmed that it had made a third and final last-ditch attempt to acquire the Swedish brand. According to a statement released by its chief executive officer (CEO) Victor Muller, the company had entered its bid and that "We have continued a constructive dialogue with GM over the acquisition of Saab… We believe the Saab brand has lots of potential and would be keen to close a deal as quickly as possible." Muller also told Agence France-Presse (AFP) that "It is the same offer we made during the weekend of 20 December, but it is being completely refined following discussions."

However, reports in the media are suggesting that other bidders have also submitted their own proposals to GM for Saab. Swedish newspaper Dagens Industri quoted Joran Hagglund, the Swedish state secretary, as saying that two groups in Sweden were ready to submit proposals, including possible management buyouts for the business. The newspaper later reported that one bid included former MAN CEO Hakan Samuelsson and former Swedish minister Jan Nygren, and called for the downsizing of the automaker but does not require loans for the European Investment Bank (EIB). It also said that the other was supported by a Luxembourg-based private-equity firm Genii Capital and would use the business plan drawn up by Koenigsegg, who pulled out of a deal to acquire the company in November. This was later confirmed in a statement by Genii Capital in which it said it had been brought into the bidding process at a late stage by advisors close to the deal, and "has decided that given an adequate and short timeframe for finalising its offer, it will aggressively work towards a successful closing of the transaction with all the relevant stakeholders of the company." It also said that its bid "can add value to the car manufacturer by working on synergies with some of its portfolio companies in the areas of energy efficient engines, OEM components and on-board IT and media technologies". The same bid will also include Bernie Ecclestone, CEO of Formula One Management, the commercial rights holder of the Formula One motor racing championship, who told Bloomberg "It's a good brand that has probably been neglected by the current owners," but added "We don't own it yet, so let's see what happens."

As a result of the latest bids, GM is expected to hold a board meeting today to discuss the future of Saab. However, sources close to Saab told Dow Jones Chinese Financial Wire that "I wouldn't be surprised if nothing happened before the Detroit Motor Show [United States]... when the Swedish delegates travel to Detroit," an engagement revealed earlier in the week.

Prior to the submission of bids for the automaker hopes were growing that if successful Saab could survive under a new owner given the efforts of the Swedish government and GM. Stefan Lofven, the chairman of the Swedish IF Metall union told Dow Jones International News that "The speculations about that GM is unwilling to sell Saab have been refuted by GM. We presuppose that that's the case and that all involved parties are now pulling in the same direction. We've also been reassured that the Swedish government is working for such a solution."

Outlook and Implications

Given the earlier persistence of Spyker during the bidding process for Saab, it comes as no surprise that it has turned out to be one of the late bidders for the Swedish automaker. However, of greater interest is perhaps the Genii Capital-backed bid. Despite it coming at such a late stage in the process, GM could well take a very close look at this. Not least of these reasons is due to its expected ability to come up with the funding to acquire and support Saab, something which seems to have been lacking in Spyker's bid. Genii Capital also already has links with the automotive industry through its investments in high-performance brake firm MOV'IT, and MCE-5, a company that has been working on variable compression ratio technology for internal combustion engines, something which Saab had worked on almost a decade ago but was shelved by GM due to cost. It also has an involvement in companies developing entertainment systems including technologies that enable use-on-demand systems as well as communications platforms. However, its recent, most high-profile related investment has been that in French automaker Renault's Formula One racing team, announced late last month. This acquisition may well have brought it into contact with billionaire Ecclestone during the negotiation process for a stake in the team, and led the two sides to look at other opportunities. All of these parts of its existing businesses could form the foundation of Saab ending its dependence on GM. Finally, Genii Capital's bid seems to use something of a known quantity to the GM board—Koenigsegg's previous business plan. This formed the basis of Koenigsegg's successful initial bid for the company and should not require much persuasion to GM's management.

However, despite these efforts it remains to be seen whether GM decides that completing a takeover would be a worthwhile effort. Despite its strengths, Genii Capital's last-minute entry would no doubt take some time to clarify and could well require time to complete the due diligence process and reach agreements over the intellectual property rights. The latter has been a stumbling block throughout the process, and with Saab being dependent on GM technology during at least the next five years through its new 9-5 sedan and estate, and its upcoming 9-4X sport utility vehicle (SUV) and 9-3, due in 2012, this could continue to be a case. These are not insurmountable though, but will require time to overcome, something which GM does not seem to want to take. Spyker's bid on the other hand is well known to GM now and having returned to the drawing board twice already should have dealt with all of GM's concerns now. But once again, with no obvious signs of financing for the bid from what is still a loss-making concern, there is little to make those on the outside think that this will succeed. It is now left in the hands of GM to decide the fate of the brand and whether that it will continue to embark on the wind down proceedings that it announced in December, adding to the tally of brands that it has killed off during the past 12 months.


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