Filed under: Chrysler, LLC., Daimler, Dodge, Earnings/Financials
Kerkorian will offer up to $4.6 billion for Chrysler
Tracinda, billionaire investor Kirk Kerkorian's company, sent two letters today, one to DaimlerChrysler's CEO Dieter Zetsche and the other to the Supervisory Board, detailing an offer of $4.5 billion in cash to buy the Chrysler Group. Kerkorian, who has been major Chrysler shareholder for more than ten years, tried to buy the company in 1995 with Lee Iaccoca but met with rejection, and following that was a factor in the DaimlerChrysler merger. Sensing a second opportunity, he has done his usual and placed himself squarely in the middle of things.
The letter to the Supervisory Board details that the offer, which would not need to be financed, would be contingent on "reaching a new satisfactory collective bargaining agreement" with the UAW, and sorting out an "equitable arrangement" with DCX on pension liabilities and health care costs. To show the seriousness of its intentions, Tracinda offered $100 million to be the exclusive negotiating partner and receive "exclusive right to conduct due diligence for 60 days." Barring any hidden surprises, if Tracinda decided not to follow through with the sale, DCX would keep $25 million. In what might be an attempt to get the UAW and Chrysler execs on its side, Tracinda points out that it would partner "with the UAW and senior management of Chrysler" and offer them "the opportunity to participate with Tracinda as equity partners in the transaction." Of course it's impossible to say what that would really mean if a sale were to occur, but at the very least it might compel the other bidders to make some sort of statement about their intentions in that regard.
[Source: Autonews]
In its letter to Zetsche, touting Tracinda's "long term, patient investing" and highlighting the fact that Tracinda will give up to seven years to build Chrysler, the letter states "The right (meaning exceptionally patient) private ownership can do things that are difficult for both public companies and the wrong (meaning not so patient) private ownership," and then lists the ability to spend seven years (!) turning the brand into a "robust and lasting, stand-alone entity," and offering a "substantial portion of equity to the UAW" as a remedy for spiraling health care costs that a profit-minded corporation simply couldn't or wouldn't bear.
As detailed in the letter, the 7-year-plan would include investments in product development and manufacturing, enlarging its "green" product mix, and improving quality. Intriguingly, Tracinda consistently only references "Asian producers" and "Asian products" as the competition Chrysler must deal with.
While the bid is only just over half of the $8 billion price that Zetsche said he wanted for the Chrysler Group in yesterday's DaimlerChrysler board meeting, Tracinda otherwise addresses every other issue Zetsche mentioned as prerogatives for a sale, and everyone will want to see how DCX and the other bidders respond, or if they respond at all.
If we're not mistaken, the is what they call the plot thickening.
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Reader Comments (Page 1 of 2)
indymcsc 4:53PM (4/05/2007)
Seems like a low ball offer.
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suvfinder 4:56PM (4/05/2007)
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dearyou 5:09PM (4/05/2007)
Like the UAW would ever want to put any money at risk in a company that they plan to bleed dry.
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Deezee 5:10PM (4/05/2007)
His name is like an illusion to me. Every time I read his name I think it says "Korean". "Korean offers 4.6 billion". I need glasses.
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66coronet 5:58PM (4/05/2007)
Tracinda points out that it would partner "with the UAW and senior management of Chrysler" and offer them "the opportunity to participate with Tracinda as equity partners in the transaction." &
Tracinda's "long term, patient investing" Tracinda will give up to seven years to build Chrysler
That sounds like a very good thing.
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nipples 6:01PM (4/05/2007)
That picture looks creepy to me. The guy back of Kerkorian looks like his evil accomplice or something.
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Yoda 6:09PM (4/05/2007)
#6 .He's a Sith.Always two there are,master and apprentice
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KML 6:12PM (4/05/2007)
#4 - hey, you have it better than me...when I read it I think "Dr. Kevorkian".
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Mike 6:28PM (4/05/2007)
I guess if you have 4.6 billion you can afford to lose...
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PeterB 6:34PM (4/05/2007)
The thing is, Kerkorian knows how to run a company. He was the only voice that was against the merger in the first place, and in fact sued the company after the "merger of equals" was proven to be a load of scheisse.
Maybe he could tap old Lee as CEO to bring the company back?
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Tool 6:36PM (4/05/2007)
It sounds like a pretty intriguing proposition. It seems like a pretty clean deal in the fact that it is cash, requires no financing and could probably handled with a minimum of SEC scrutiny. The big stickler, of course, will be the assholes at the UAW--I'm sure they will find a way to muck this up.
I still like the idea of Wolfgang Bernhard running Chrysler. I think they need someone who has strong operating experience and is not afraid to take on a big challenge.
It also helps that Bernhard was COO a few years back and did some good things during his short tenure. Since Chrysler will still have many tie-ins with Daimler for years to come, it would make sense to have someone who understands both organizations.
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Jeff Banks 7:12PM (4/05/2007)
I say let him go for it if he can afford it. Lets face it, Chrysler isn't doing so hot now and if he's one of the primary shareholders, it sounds like he's weathered a lot of bad times lately. If he's still willing to stick around (and actually buy it) he sounds pretty passionate about getting the company off the ground to me.
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Billy C. 8:02PM (4/05/2007)
According to the Wall Street Journal, when Tracinda says they want to "partner" with the UAW, they mean the UAW will get stock in the new company in exchange for giving up worker benefits and payrates. Same with management.
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wally 8:27PM (4/05/2007)
Just to keep his name in the news!!
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n400 12:32AM (4/06/2007)
Oh great, more chaos for Chrysler. Looking forward to the upcoming Renault-Nissan-Chrysler tie-up.
Maybe he can bring back the old AMC moniker so they could import some Renault Appliances back into the US.
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iQuack 12:44AM (4/06/2007)
This makes me feel better about a few nominal investment losses I've suffered over the years.
Mercedes has done very poorly after spending somewhere between $35 and $40 BILLION for Chrysler and then, after 9 years, coughs up a hairball worth only $4.5 Billion!
I don't think Chrysler will be sold that cheaply, but it's not worth much without plenty of UAW cooperation.
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Barney 2:32AM (4/06/2007)
The man is an investor. He once owned 9.9% of GM stock. He tried to convince Renault to buy a larger share of GM stock to help rescue GM from itself. GM rejected the bid and he sold most of his stock. Kirk will sell stock to any bidder he thinks will help him rebuild Chrysler. He is a money man and will sell the car maker to anyone who offers him more. The sale will not be permanent. It'll probably turn over before the ink is dry.
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fearless 3:23AM (4/06/2007)
4.6 Billion + 1 mean karate chop.
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C. McFeeny 8:07AM (4/06/2007)
I'll be the first to admit that while I work in the automotive industry, I know very little about the actual financial dealing of these companies. So, I feel a little out of my depth to comment on this, but there are a lot more less informed people than myself making wild statements and ridiculous speculation. So, here goes -- I like Kirk and I like his proposal. I like that he has to guts to go public with it and throw it out there. It's like he grabbed the gold teeth out of his mouth and threw em' on the poker table to ante up. Serious moves. I think he knows what he is doing and I think he is in it for the long haul, or at least a long of a haul as a guy his age can handle at this point. If he does end up partnering up Chrysler with Nissan/Renault I think that can only be a good thing and Chrysler without Daimler will not be nearly as global of an organization as it was. They'll need some other partner to make it on the world stage.
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mr.ed 9:53AM (4/06/2007)
He coulda got it for a billion less by waiting another few weeks.
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