Banker Says Daimler Owes $6 Billion
DaimlerChrysler owes investors more than $6 billion as a takeover premium for the 1998 combination of Daimler-Benz and Chrysler Corp., an investment banker testifying on behalf of billionaire Kirk Kerkorian said Monday.
Daimler-Benz of Germany should have paid a 50% premium for acquiring Chrysler instead of the 28% it paid as part of the automakers’ $36-billion merger, said Conrad Meyer, a banker with Gleacher Partners. That would have provided an extra $6.4 billion to Chrysler investors, with Kerkorian getting $856 million of that, he said.
“The 50% premium is the minimum threshold justifiable to Chrysler shareholders at the time of the transaction,” Meyer testified during the trial of Kerkorian’s lawsuit against DaimlerChrysler in Wilmington, Del.
Kerkorian, who was once Chrysler’s largest shareholder, is seeking as much as $3 billion in damages for stock losses related to the merger, which has not boosted returns as predicted. Shares of DaimlerChrysler, the world’s fifth-largest automaker, have fallen 53% since the deal closed in November 1998.
DaimlerChrysler’s lawyers contend that Kerkorian, the controlling shareholder of movie studio Metro-Goldwyn-Mayer Inc. and the MGM Mirage casino in Las Vegas, is trying to make the automaker the scapegoat for his decision to hold the company’s shares while their value dropped. The company estimates that he has made $2.7 billion as a result of the merger.
Kerkorian contends that DaimlerChrysler Chief Executive Juergen Schrempp concealed plans to take control of the combined automaker to make the acquisition more acceptable to U.S. antitrust regulators and investors.
Schrempp also cloaked the transaction as a merger of equals to avoid paying as much as a $10-billion premium for taking over the company, Kerkorian contends. Schrempp is scheduled to take the witness stand today.
Daimler-Benz and Chrysler executives never referred to the 28% premium built into the combination as a takeover premium, Steven Koch, a Credit Suisse First Boston investment banker involved in the deal, testified via videotape Monday.
“We didn’t think about it one way or the other,” Koch said.
Last week, former Chrysler Chief Executive Robert Eaton acknowledged that the 28% premium wasn’t negotiated as a takeover premium, because the transaction was characterized as a merger of equals.
