China's Geely Automobile has approached Magna International about joining the Canadian auto part maker's bid for Opel, a source familiar with the matter said, as China chases Western brands and the technology it needs to drive future growth.
General Motors agreed earlier this month to sell a 55 percent stake in car maker Opel to a group led by Magna, a deal that GM's CEO Fritz Henderson expects to be finalized next month.
GM will keep 35 percent of Opel, with Magna and Russian state bank Sberbank each taking 27.5 percent.
Talks between the Chinese and Magna included a possible Geely stake in Opel, said the source, speaking on condition of anonymity because the discussions were private. But Magna is refraining from any such partnership for now, the source added.
It was not immediately clear if the Geely involved in the talks was Hong Kong-listed Geely Automobile Holdings or its non-traded privately-held parent company. But Lawrence Ang, executive director at Geely Automobile said the listed firm had never approached Magna on Opel.
Magna was not immediately available for comment. A spokesman for Opel said there was no new information on the matter.
Geely has growing ambitions as a global player, and has said its parent may team up with a local government-backed investor to jointly bid for Ford Motor's Volvo car unit, which media reports have valued at nearly $2 billion.
But analysts said Chinese automakers, already battling in their home market -- the world's largest -- against foreign brands made at local joint ventures, will struggle to manage overseas auto assets given their limited international exposure.
Another Chinese automaker, Beijing Automotive had bid for a stake in Opel, but conceded defeat in July after failing to agree with GM on intellectual property issues.
I think it will be hard for Geely to have a piece of the Opel deal in the first place, said Li Mengtao, an analyst with Sinolink Securities. Magna's already got a Russian partner and involvement from a Chinese firm will make it very complicated.
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, and a high-level Sberbank source told Reuters there were four possible candidates to take over its stake.
All four were Russian, and analysts have said the stake could end up with GAZ, controlled by Russian businessman Oleg Deripaska.
Chinese automakers have attempted a few overseas acquisitions in recent years with limited success.
SAIC Motor Corp, China's biggest automaker, bought 51 percent of South Korea's loss-making Ssangyong Motor, but was later forced to write off its investment.
What the Chinese can actually get are mostly distressed assets that few really want, said Zhang Xin, an analyst with Guotai Junan Securities. They may not cost much at the moment but you never know how deep a hole the automakers would be dragged into later on.
The source did not say how big a stake Geely sought in Opel, but the Magna consortium plans to inject 500-700 million euros ($737 million-$1 billion) into Opel, split proportionately between the two partners.
Geely's Hong Kong-traded shares were suspended on Wednesday pending an announcement on a convertible bond issue, which Ang said was not related to Volvo. The China Business News said Geely planned to issue convertible bonds and warrants worth $250 million.
(Additional reporting by Helen Massy-Beresford and Angelika Gruber, Editing by Jacqueline Wong & Ian Geoghegan)