Court Rules for Daimler in Kerkorian Suit
A federal court Thursday ruled in favor of DaimlerChrysler in a high-profile securities lawsuit that pitted the U.S.-German automaker against billionaire investor Kirk Kerkorian.
Kerkorian sued DaimlerChrysler for more than $1 billion, claiming that DaimlerBenz engineered a takeover of Chrysler Corp. in 1998 and then cheated him out of an acquisition fee by claiming it was a merger of equals.
DaimlerChrysler insisted the merger was one of equals and that Kerkorian, whose Tracinda Corp. was Chrysler’s largest shareholder at the time, grew disgruntled when his stock price fell.
U.S. District Judge Joseph Farnan Jr. presided over a trial in Wilmington, Del., that concluded in February 2004.
DaimlerChrysler Chairman Jurgen E. Schrempp said Thursday that the company was pleased with the court’s decision because it confirmed “once and for all that the Tracinda case lacked any merit and that all claims against DaimlerChrysler relating to the 1998 merger were completely baseless.”
The case has been a thorn in the side of Schrempp, whose comments in an interview with the Financial Times after the merger were used by Kerkorian in his suit.
The company has struggled to make the efficiency and global scale promised by the merger pay off for shareholders, whose stock remains worth considerably less than it did when the two firms linked up. DaimlerChrysler stock has lost about a third of its value over the last five years.
Kerkorian attorney Terry Christensen said after the trial that calling the transaction a merger of equals resulted in DaimlerBenz saving at least $7 billion in an acquisition, Chrysler managers getting rich and Chrysler shareholders being cheated out of a control premium.
But in testimony, University of Chicago professor Daniel Fischel said Kerkorian benefited from the deal as well.
Fischel, a business law expert hired by DaimlerChrysler, concluded that the 28% premium received by Kerkorian and other Chrysler shareholders was comparable to and often higher than premiums in similar deals, regardless of whether they were considered acquisitions or mergers of equals.
He said the value of Kerkorian’s Chrysler holdings increased by $1 billion simply upon the announcement of the deal.
Kerkorian pointed to a 2000 interview with the Financial Times in which Schrempp said that the German-heavy management of DaimlerChrysler at the time was what he always envisioned and that the combination of the companies was billed as a merger of equals “for psychological reasons.”
In August 2003, DaimlerChrysler agreed to pay $300 million to settle a $22-billion class-action lawsuit filed by other investors who also claimed they were misled.
