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Magna deal to buy Opel on track

The consortium led by Canadian car parts group Magna remains on track to buy General Motors' German carmaker Opel, a senior German politician said.

“There is not the slightest reason to assume why it should not come to an agreement between GM and Magna,” Hesse state premier Roland Koch told reporters at Opel's headquarters.

The German government last month provided bridge financing to help stitch together a preliminary deal with Magna, which beat out rival offers from Italian carmaker Fiat, private equity group RHJ International and Chinese automaker BAIC.

The German government has said the rival suitors cannot be ruled out of the race for Opel until a final contract is signed, but Koch said Fiat had no real chance.

“Fiat's entry would have raised more questions than it answered. There was not a second of due diligence for Fiat,” he said.

Magna and bankrupt US carmaker GM are still negotiating details of the accord - including the future of GM's Russian plants, Koch said - so that a memorandum of understanding can be turned into a binding contract.

“We cannot yell hooray yet, there is a lot of work ahead of us. I think a few storms will pass our way but we will also see sunshine,” Opel Chief Executive Hans Demant said.

Magna and its Russian partners Sberbank and GAZplan to make the Russian market a focal point for Opel, which now includes its British sister brand Vauxhall as well.

Magna is supposed to get a 20% stake and state-controlled Sberbank is set to get a 35% stake in the new Opel but the bank has said it did not intend to keep it for the long term.

Koch said it could not sell the stake without the consent of other shareholders but that the bank had already raised the possibility of transferring the holding to GAZ, which is set to act as a manufacturing partner without a stake of its own.

Koch said the Magna group would invest €500 million in Opel, of which around €100 million is due when the contract is signed. The last tranche is due in 2012. (Reuters)