DaimlerChrysler Agrees to Sell Chrysler to Cerberus
By Kyodo News International, Tokyo
May 14–NEW YORK — DaimlerChrysler AG said Monday it will sell more than 80 percent of its struggling North American division Chrysler to U.S. private equity firm Cerberus Capital Management LP.
An affiliate of Cerberus will acquire an 80.1 percent equity stake in the future new company, Chrysler Holdings LLC, for 5.5 billion euros ($7.4 billion) while DaimlerChrysler will retain a 19.9 percent interest, the German auto giant said in a statement.
“We’re confident that we’ve found the solution that will create the greatest overall value — both for Daimler and Chrysler,” Dieter Zetsche, chairman of the DaimlerChrysler board, said. “With this transaction, we have created the right conditions for a new start for Chrysler and Daimler.” DaimlerChrysler will change its name to Daimler AG, subject to approval by its shareholders at an extraordinary general meeting this fall.
The deal, which is expected to be completed by the third quarter of this year, will put an end to the 1998 transatlantic merger between Daimler-Benz AG and Chrysler Corp., paving the way for the American automaker to rehabilitate itself under Cerberus.
The deal calls for Chrysler to retain obligations for pensions and healthcare costs and is expected to result in a net cash flow of 500 million euros for DaimlerChrysler.
Reassuring labor unions in the United States, Ron Gettefinger, president of the United Auto Workers said, “The transaction with Cerberus is in the best interest of our UAW members, the Chrysler Group and Daimler. We are pleased that this decision has been made.” John Snow, chairman of Cerberus, said, “We welcome Chrysler into the Cerberus family of companies and believe Cerberus will be a good home for Chrysler. Cerberus believes in the inherent strength of U.S. manufacturing and of the U.S. auto industry. Most importantly, we believe in Chrysler.” Daimler and Chrysler will continue cooperation as business partners, Zetsche said.
According to the deal, Chrysler Holdings will hold 100 percent each of the future Chrysler Corp. LLC, which will produce and sell Chrysler, Dodge and Jeep vehicles, and the future Chrysler Financial Services LLC, which will provide financial services for these vehicles in the North American market.
In February, DaimlerChrysler said that all options were open for Chrysler and launched studies and negotiations with several concerns interested in purchasing the struggling American automaker, such as Magna International Inc., a major Canadian auto parts supplier, and a consortium of investors led by U.S. investment fund Blackstone Group.
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