Cerberus to take over majority interest in Chrysler
14 May 2007
DaimlerChrysler announced that it will sell the majority interest in its Chrysler Group to Cerberus Capital Management, a New York-based private equity firm. DaimlerChrysler will be renamed to Daimler AG.
Cerberus will make a capital contribution of €5.5 billion ($7.4 billion) in return for an 80.1% equity interest in the future new company, Chrysler Holding LLC. 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.
Of the total capital contribution of €5.5 billion, €3.7 will flow into the industrial business (Chrysler Corporation), €0.8 will go to the financial services business. DaimlerChrysler will receive the balance of €1.0 billion. In addition, DaimlerChrysler will grant a loan of €0.3 billion to Chrysler Corporation.
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, the transaction will give rise to a cash outflow of €1.2 billion for DaimlerChrysler, resulting in an overall net cash outflow from the transaction to the company of €0.5 billion.
At the time of the 1998 merger, the Chrysler Group was valued at about $39 billion.
Closing of the transaction is expected to take place in the third quarter of 2007. Chrysler will retain pension and health care obligations.
Chrysler will continue existing projects with the Mercedes Car Group, for example the development of conventional and alternative drive systems, purchasing, and sales and financial services outside the NAFTA region. The companies will establish a Joint Automotive Council in which representatives of both sides will assess and decide on the potential of new and current projects.