Saturday, April 07, 2007

Kerkorian’s Chrysler bid boosts Daimler

Kerkorian’s Chrysler bid boosts Daimler
By Richard Milne in Frankfurt, James Politi in New York and Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: April 6 2007 21:03 | Last updated: April 6 2007 21:03

Kirk Kerkorian’s $4.5bn bid for Chrysler looks to have strengthened the hand of DaimlerChrysler in the sale of its US subsidiary, sending the German parent’s shares to their highest level since 1999.

The offer by the veteran corporate raider on Thursday raised hopes among investors that one of the most high-profile transatlantic mergers will end in a break-up. DaimlerChrysler’s shares rose almost 3 per cent to close at €84.80 on the day.

The move also raised the question whether the 89- year-old Mr Kerkorian will again turn for help to Carlos Ghosn, Renault-Nissan’s chairman. Mr Kerkorian unsuccessfully sought to orchestrate an alliance between Renault-Nissan and General Motors last year.

Tracinda, Mr Kerkorian’s holding company, is competing for control of Chrysler against three other bids. One is from Blackstone with Centerbridge; another is from Cerberus Capital Management; and the third is from Magna, the Canadian vehicle components maker, in partnership with private equity firm Ripplewood. Unlike Tracinda, Mr Kerkorian’s investment vehicle, these bidders have already gained access to Chrysler’s books.

Renault-Nissan ruled itself out as a bidder for Chrysler to focus on its own operations. But according to one source, Mr Ghosn’s interest could be rekindled if suitable North American assets become available.

Mr Kerkorian has been a thorn in DaimlerChrysler’s flesh for more than a decade. He was Chrysler’s largest single shareholder when the Detroit carmaker agreed to be sold to Daimler-Benz in 1998 in the largest industrial merger at the time. But he later accused Daimler of fraud, claiming it had surreptitiously presented the deal as a merger of equals when it was plotting a takeover. Mr Kerkorian argued that Daimler should have paid a much higher price to Chrysler shareholders. But a federal judge ruled against him.

Tracinda expressed confidence in a letter to Dieter Zetsche, DaimlerChrysler’s chairman, that “by taking a long-term approach to solving Chrysler’s problems, [Chrysler] can become a robust and lasting standalone entity”.

A private equity adviser not involved in the sale said: “This is likely to be the deal of the century for whoever gets it. Daimler are being forced to sell it now at a really weak price but in a few years when this is fixed it will fetch a fortune.”

Tracinda said it intended to offer equity in the transaction to the US carmaker’s management, as well as its unionised workforce.

Its bid is conditional on reaching a satisfactory labour contract with the United Auto Workers union, and with Daimler on sharing pension liabilities and retiree health care costs.

Daimler declined to comment on Mr Kerkorian’s bid except to reiterate “all options” remained open and that it was in talks with unspecified bidders.


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