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Saab's prospects for survival brighten considerably

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Saab's prospects for survival brighten considerably

Automotive News -- February 12, 2010 - 11:01 am ET

Saab's chances of survival improved sharply after two key events today.

The European Investment Bank (EIB) approved a 400 million euro ($544 million) loan to Saab, a crucial part of Spyker Cars NV's deal to take control of the Swedish automaker after two decades of General Motors ownership. The move came hours after Spyker shareholders approved the deal in the Netherlands.

The developments would have been hard to imagine two months ago. Saab appeared to be dead after GM said it would shut down the brand because a deal with Spyker couldn't be completed quickly enough.

"Months of hard work have paid off," Spyker CEO Victor Muller said in a statement. "We cannot wait to close this transaction now as soon as practically possible."

Said Saab CEO Jan Ake Jonsson: "This represents another milestone along the path toward the creation of an independent Saab. This is very good news, and everyone at Saab should feel very positive now."

During the shareholders' meeting, Muller said that if the deal is completed, the combined carmakers will seek to list shares in London and Stockholm and leave the Amsterdam stock exchange.

"With this acquisition, we have a very rare opportunity to buy into an iconic brand," said Muller, a former mergers-and-acquisitions lawyer and fashion brand executive who revived a defunct Spyker brand as a luxury automaker a decade ago.

Asked whether any new listings would make it easier to raise cash, Muller said the goal was "to be closer to investors."

Cold reception

Despite high hopes, Europe's public offerings have met with tepid investor interest this year, with deals attracting funding below target or shelved altogether.

Muller "is going to have to prove what Spyker can do with the business," said Ian Fletcher, an analyst at IHS Global Insight.

GM agreed late last month to sell the struggling 60-year-old Saab brand as it rebuilds its business, and struck a deal with Spyker two weeks ago after intense negotiations and two failed bids.

Spyker is paying GM $74 million in cash and $326 million in redeemable preference shares for Saab. The deal was contingent on Saab getting the EIB loan.

Muller has already secured the $50 million needed to close the deal with GM, with the remaining $24 million due in July.

He also vowed that the new group will reach profitability in 2012, although neither Saab nor Spyker has made any money in the past decade.

With the loan, Saab's $200 million in cash and the redeemable shares, Muller said Saab would have enough to fund its business plan. The brand's revival is centered on a new 9-5 that launches this year, the arrival of the 9-4X crossover in 2011, and the debut of a new 9-3 in 2012.

Saab produced just 20,791 cars last year as sales slumped to 39,903 from 94,751 in 2008. It aims to raise production to pre-crisis levels of about 100,000 to 125,000 within two years with the help of the new models and a new sales and distribution strategy.

Reuters contributed to this report.

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