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Cerberus Offers to Buy Germany's RAG for $10.6 Billion

Private equity investor Cerberus is bidding 8 billion euros ($10.6 billion) to buy German conglomerate RAG's assets set to be floated, a source familiar with the situation said on Thursday.

RAG confirmed that German politicians who approved on Wednesday a flotation of RAG's non-coal businesses knew of an offer from Cerberus worth 6-8 billion euros and that additional offers from financial investors were also expected.

Cerberus declined to comment.

The Essen-based conglomerate plans to list its energy, chemicals and property units next year in what would be one of the largest share sales in post-war German history. Its coal business will not be part of the flotation.

The source familiar with the negotiations said the Cerberus offer envisioned preserving the non-coal RAG businesses as one entity so that it might still be floated even after any sale to
the U.S.-based buyout firm.

Cerberus -- which last month agreed to buy a majority stake in U.S. carmaker Chrysler from DaimlerChrysler for $7.4 billion -- is open to the idea of bringing industrial partners on board
should it win RAG, the source said.

The Westdeutsche Allgemeine Zeitung newspaper also reported that Cerberus was bidding for RAG, but said German politicians had rejected the offer. The source questioned this, saying: "The dice have not yet been cast."

RAG is owned by German utilities E.ON and RWE, along with steelmakers ThyssenKrupp and Arcelor Mittal.

All four companies plan to dispose of their stakes to free themselves from the liabilities of RAG's loss-making coal-mining activities.

They plan to put the stakes in a state-controlled foundation to be established which would take over responsibility for the coal-mining pension and environmental liabilities. Proceeds from the flotation would finance the liabilities.