By JAMES POLITI
4 August 2007
Financial Times Newspaper
COMPANIES INTERNATIONAL
(c) 2007 The Financial Times Limited. All rights reserved
Chrysler back in US hands as Cerberus closes deal
Cerberus Capital Management yesterday closed its Dollars 7.4bn acquisition of Chrysler after reaching an agreement with DaimlerChrysler to take on Dollars 2bn in debt jointly to help finance the deal amid the
turmoil in the credit markets.DaimlerChrysler will take on Dollars 1.5bn of that debt, while Cerberus is taking on the remaining Dollars 500m.
DaimlerChrysler said its "financing support is a strong sign of its overall determination to make sure that,under the majority ownership of Cerberus, Chrysler has a good start as a successful stand-alone car company".
DaimlerChrysler is keeping a 19.9 per cent stake in Chrysler.
The investment banks underwriting the Chrysler debt package took a loss to complete the sale of loans tied to its financing arm.
The loans were sold at adiscounted 95 cents in the dollar.
The closing of the deal returns Chrysler to US ownership after nine years of control by Germany's DaimlerChrysler, which will be renamed Daimler later this year.
In 1998, Daimler-Benz and Chrysler merged in a Dollars 35bn deal that was the largest industrial merger at the time and also a bold experiment in the execution of a sizeable transatlantic takeover.
However, DaimlerChrysler's US unit was unable to insulate itself from the troubles in the US automotive sector - which also hit rivals Ford and General Motors - forcing its German parent to consider a sale beginning in February.
Dieter Zetsche, chairman of DaimlerChrysler's management board, said the closing of the sale marked "a new chapter" in the company's history.
"Based on the clearly defined strategies in our Mercedes car group, truck group, financial services business divisions and for vans and business, and our company's healthy balance sheet, we have every reason to move confidently into the future," Mr Zetsche said.
Chaired by John Snow, former US Treasury secretary, Cerberus will be relying on Chrysler's existing management, led by chief executive Tom LaSorda, to run the business.
The tackling of tough labour negotiations will be an early challenge, although Ron Gettelfinger, chairman of the powerful United Auto Workers union, unexpectedly backed the Cerberus offer.
The Chrysler takeover has been described as one of the most ambitious private equity deals ever, and is seen as a test of the ability of buy-out groups to succeed in complex, high-profile transactions.
Based in New York, Cerberus has already invested in the automotive sector, where last year it teamed up with Citigroup to buy GMAC, the GM finance unit.
