Shares of Voestalpine AG soared yesterday amid news reports and persistent rumours that Magna International Inc. is seeking to buy the Austrian government's 35-per-cent stake in the steel, railway and auto parts giant.
Voestalpine shares jumped 2.60 euros ($4.11) to 34.50 euros in trading on the Vienna Stock Exchange after Austrian magazine Profil reported that Magna is preparing to bid on the government's stake in the company.
The weekly magazine said the discussions are code-named "Minerva" and are led by Morgan Stanley Inc., with the participation of two Canadian executives from Magna.
A Magna deal to buy Voestalpine "would probably make sense," said one source close to the discussions inside Magna, which has forged close links to Austria's political and business elite.
The purchase would increase the Canadian giant's already strong presence in the country where company founder Frank Stronach was born.
Magna is one of the largest industrial employers in Austria through its Magna-Steyr vehicle assembly and engineering unit. Since the Canadian company purchased Steyr-Daimler-Puch Fahrzeugtechnik AG & Co. KG in 1998, Magna-Steyr has grown into the largest vehicle assembler on a contract basis for the world's auto makers.
The Austrian magazine said a government working group that includes two Magna executives has begun preparing for the sale of Voestalpine.
"They had very concrete details in this article," said Brigitte Kellerer-Wendelin, who follows the company for Erste Bank in Vienna.
Magna spokesman Andreas Rudas would not comment.
Mr. Stronach has developed strong ties to the country of his birth since the 1998 assembly unit purchase.
Rudolf Streicher, who sits on the board of Magna's Intier Automotive Inc. subsidiary, is chairman of Voestalpine's supervisory board, equivalent to the board of directors.
He is a former minister for economic affairs and transportation in the Austrian government and is also the former chief executive officer of the Austrian agency charged with selling off state assets.
Austria's current Finance Minister, Karl-Heinz Grasser, is a former Magna employee who has acknowledged that he will have a job waiting for him back at Magna when he leaves politics.
Two Magna board members are also prominent in Austria's political and business circles, including Franz Vranitzky, who was Austria's chancellor for 11 years, and Gerhard Randa, chairman of the supervisory board of Bank Austria Creditanstalt AG.
If Magna were to purchase the government's stake in Voestalpine, it would be required under Austrian law to bid for the rest of the company.
Voestalpine had sales of 4.39 billion euros in the year ended March 31, but the auto parts business represented just 17 per cent of sales.
The bulk of the revenue came from the steel business with 47 per cent, while a railway division contributed another 27 per cent of sales.
Analysts said the most likely scenario is that Magna would sell off everything but the auto parts business, similar to what it did when it bought Steyr, which at the time owned an armaments operation as well as car dealerships throughout Austria.
One analyst thought German steel maker Thyssen Krupp AG would be a likely buyer of the steel assets.
Another analyst who follows Magna said there are steel assets around the world for sale so it wouldn't be an opportune time to put more on the block.
In a recent report, Ms. Kellerer-Wendelin said a key blast furnace overhaul is needed next year, just when Voestalpine will be hit by weaker steel prices.
"The fading business outlook is not ideal for a full privatization in 2003-04," she noted.