The chase by Cerebrus Capital for Chrysler ended yesterday with the announcement from the Stuttgart-based DaimlerChrysler that ‘an affiliate of private equity firm Cerberus Capital Managem
The chase by Cerebrus Capital for Chrysler ended yesterday with the announcement from the Stuttgart-based DaimlerChrysler that ‘an affiliate of private equity firm Cerberus Capital Management, LP, New York, will make a capital contribution of USD 7.4 billion in return for an 80.1% equity interest in a future new company, Chrysler Holding LLC.’
DaimlerChrysler is holding an Extraordinary Shareholders’ Meeting to decide on change its name to back Daimler AG, ending its ill-fating alignment with Chrysler. Cerberus will acquire an 80.1% equity interest in a new company Chrysler Holding LLC, in which DaimlerChrysler AG will retain 19.9% Obligations for pensions and healthcare costs will be retained by Chrysler companies
The transaction is expected to result in net cash outflow of EUR 0.5 billion for DaimlerChrysler, whose net profit according to IFRS in 2007 to be reduced in a range of EUR 3-4 billion.
DaimlerChrysler will hold a 19.9% equity interest in the new company. Chrysler Holding LLC will hold 100% each of the future Chrysler Corporation LLC, which produces and sells Chrysler, Dodge and Jeep vehicles, and the future Chrysler Financial Services LLC, which provides financial services for these vehicles in the NAFTA region.
Of the total capital contribution of EUR 5.5 billion, EUR 3.7 billion will flow into the industrial business (Chrysler Corporation LLC) and EUR 0.8 billion will flow into the financial services business in order to strengthen the equity base of both businesses. DaimlerChrysler will receive the balance of EUR 1.0 billion. In addition, DaimlerChrysler will grant a loan of EUR 0.3 billion to Chrysler Corporation LLC.
According to the agreement, upon the closing of the transaction, DaimlerChrysler will transfer the industrial business of the Chrysler Group completely free of debt. Due to the Chrysler Group’s anticipated negative cash flow until closing in connection with its restructuring plan, the transaction will give rise to a cash outflow of EUR 1.2 billion for DaimlerChrysler. The overall net cash outflow resulting from the transaction will therefore be EUR 0.5 billion. In addition, DaimlerChrysler will have to discharge long-term liabilities of the Chrysler Group in connection with the transaction. This will result in prepayment compensation of approximately EUR 650 million, to be borne by DaimlerChrysler. The usual transaction costs will also be incurred.
