Kerkorian to Dump Advisor Under Pact With Chrysler

Chrysler Corp.’s peace pact with Kirk Kerkorian calls for the billionaire investor to terminate contracts with his investment bankers and outside advisor, the auto maker said Tuesday.

Within 30 days, Kerkorian’s Tracinda Corp. will end a lucrative pact with Wasserstein Perella & Co., its chief financial advisor.

In addition to an initial fee of $7.5 million, Wasserstein Perella stood to gain another $7.5 million if Chrysler agreed to buy back $5 billion worth of stock and $12.5 million if Chrysler agreed to a buyout by Tracinda.

However, the five-year standstill agreement Chrysler and Tracinda announced last week fell short of those goals. Chrysler agreed to put longtime Tracinda executive James Alijian on the Chrysler board, but agreed to buy back only $3 billion worth of stock over the next two years, among other provisions.

During the last several months, Chrysler Chairman Robert Eaton had denounced Kerkorian’s contracts with his advisors, saying

they were “incentivized for a buyout” of the auto maker.

A Tracinda spokesman refused to comment on the terminations.

“There’s nothing sinister here about this,” Chrysler spokesman Steven Harris said of the agreement to terminate the Wasserstein Perella contract. “This was an element of the peacemaking.”

Harris said Chrysler also plans to “phase out” the three investment banking firms and other advisors it hired to defend itself against Kerkorian, although that is not part of the formal agreement with the investor.

Kerkorian also must terminate pacts with corporate governance advisor Ralph Whitworth and proxy solicitor D.F. King & Co. under the agreement with Chrysler.

In a 13-D filing with the Securities and Exchange Commission, Tracinda said it “will terminate, within 30 days from the date of this agreement . . . all of its arrangements, as the same relate to Chrysler, with its financial, corporate governance, and proxy solicitation advisors, such terminations to be solely at Kerkorian’s cost and expense.”

Chrysler’s stock closed down 37.5 cents at $56.50 on the New York Stock Exchange.