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UPDATE 2-China's Geely approached Magna for Opel stake -source

Published 09/17/2009, 06:03 AM
Updated 09/17/2009, 06:06 AM

* Geely approaches Magna for Opel partnership

* Geely interested in Opel stake

* Analysts question Geely's ability to manage assets abroad

* Geely, Magna unavailable; Opel says no new information

(Adds Opel spokesman, background)

NEW YORK, Sept 17 (Reuters) - China's Geely Automobile Holdings has approached Magna International about a partnership on carmaker Opel, a source familiar with the matter said on Thursday, in its latest move to chase a Western brand.

General Motors' board has recommended the sale of a majority stake in Opel to Canadian auto parts supplier Magna and its Russian partner Sberbank. GM Chief Executive Fritz Henderson expects to sign a deal next month.

Talks between Geely and Magna included the possibility of the Chinese carmaker taking a stake in Opel, but Magna is refraining from such a partnership for now, the source said on Thursday, declining to be identified as the talks were private.

Geely executives could not immediately be reached for comment. Magna was also not immediately available for comment. A spokesman for Opel said there was no new information on the matter.

Geely's gesture to Magna, which came after it recently confirmed its interest in bidding for Ford's Volvo car unit, underscores Chinese carmakers' growing ambitions to become global players.

Another Chinese automaker, Beijing Automotive (BAIC) had bid for a stake in Opel. It conceded defeat in July, saying it failed to agree with GM on intellectual property issues.

But industry analysts said Chinese automakers, weak in their home market, would find it challenging to handle overseas auto assets given their limited international exposure.

"It will be hard for Geely to have a piece of the Opel deal in the first place. Magna's already got a Russian partner and involvement from a Chinese firm will make it very complicated," said Li Mengtao, an analyst with Sinolink Securities.

"It also makes little sense for Geely if it ends up being a minority shareholder with little access to the technologies it desperately needs."

Sberbank has said it has no plans to remain a strategic investor in Opel for a long time, and a high-level Sberbank source has told Reuters there were four possible candidates to take over the bank's 27.5 percent stake.

All four possible buyers were Russian, and analysts have said the stake could end up with GAZ, controlled by Russian businessman Oleg Deripaska.

Geely's Hong Kong-traded shares were suspended on Wednesday pending an announcement on a proposed convertible bond issue, which its executive director said was not related any potential bid for Volvo.

It is unclear whether the bond issue is related to Geely's possible deal with Magna on Opel. (Reporting by Jui Chakravorty Das; Additional reporting by Fang Yan, Helen Massy-Beresford and Angelika Gruber; Editing by Lin Noueihed)

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