Daimler Deceived Him in Deal, Kerkorian Says
Billionaire investor Kirk Kerkorian testified Tuesday that he never would have supported the deal creating DaimlerChrysler if it had not been portrayed as a “merger of equals” between the German and American automakers.
Kerkorian, who is suing the company for more than $1 billion in compensatory and punitive damages, said that in his dealings with former Chrysler Chairman Robert Eaton there was no indication that the Daimler-Benz and Chrysler combination was anything else.
“It was always called a merger of equals,” Kerkorian testified in federal court in Wilmington, Del.
Kerkorian, whose Tracinda Corp. was the largest Chrysler shareholder at the time of the merger, claims that Daimler-Benz executives secretly organized a Chrysler takeover while proposing a merger of equals.
As a result, Kerkorian claims, Daimler-Benz avoided paying him an acquisition fee of as much as 62% on his shares when the companies merged. Kerkorian owned 14% of Chrysler’s shares at the time of the merger.
DaimlerChrysler maintains that Kerkorian supported the deal and grew disgruntled only when his shares lost value.
A key issue in the lawsuit is a 2000 interview that DaimlerChrysler Chairman Jurgen Schrempp gave to the London-based Financial Times. In the interview, Schrempp was quoted as saying that he never meant for the merger to be one of equals and that the deal was billed that way “for psychological reasons.”
In the interview, Schrempp described Chrysler as a division of Daimler and said the German-heavy management “was always the structure I wanted.”
Kerkorian said Tuesday that he would not have supported the deal if the article had appeared at the time and that he was surprised and upset by the report. He said his doubts about the deal being a merger of equals grew when Chrysler Chairman James Holden was fired a short time later and replaced by Dieter Zetsche.
“Everything fell in place,” Kerkorian said. “The article, Holden being fired, people coming over from Stuttgart.”
Kerkorian said the trust that he considers crucial in his business dealings was lacking in the merger.
“You have to have trust and honesty,” he said. “Instead if you get deceit and fraudulence, which I feel has happened here with Daimler, it doesn’t work.”
Kerkorian testified that Eaton came to him in early 1998 to discuss the proposed deal. Kerkorian said Eaton told him he needed Tracinda Corp., which owned about 89 million Chrysler shares, to support the deal or the Chrysler board would not go along.
