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.
Sign in to post
Please sign in to leave a comment.
Continue