MUNICH (May 14, 2007) — Private equity group Cerberus Capital Management will take control of the Chrysler group in a transaction valued at $7.45 billion (5.5 billion euros).
DaimlerChrysler A.G. announced the Cerberus deal this morning. An affiliate of Cerberus will acquire 80.1 percent of Chrysler, while DaimlerChrysler will retain 19.9 percent.
Most of the $7.45 billion outlay from Cerberus will go directly to the future new company, Chrysler Holding L.L.C. Chrysler's automotive business will get $5 billion, while the financial services business gets $1.05 billion. DaimlerChrysler will receive the balance of $1.35 billion. In addition, DaimlerChrysler will loan $400 million to the Chrysler automotive operation.
DaimlerChrysler will transfer the unit free of debt. Because of the cost of Chrysler's restructuring plan, the transaction will result in a cash outflow of $1.6 billion for DaimlerChrysler. DaimlerChrysler's net cash outflow resulting from the transaction will be $650 million.
Chrysler's pension and health care obligations will be retained by the Chrysler companies.
“We're confident that we've found the solution that will create the greatest overall value—both for Daimler and Chrysler,” DaimlerChrysler Chairman Dieter Zetsche said in a prepared statement. “With this transaction, we have created the right conditions for a new start for Chrysler and Daimler.”
“We will be the leading manufacturer of premium vehicles and a provider of premium services in every market segment we serve worldwide,” Mr. Zetsche said.
United Auto Workers (UAW) President Ron Gettelfinger said the transaction with Cerberus “is in the best interests of our UAW members, the Chrysler Group and Daimler.”
The transaction is expected to close during the third quarter of this year. A press conference is scheduled for 2 p.m today in Stuttgart (8 a.m. EST).
Tom LaSorda, Chrysler Corp. CEO, issued the following statement:
“We are confident that this transaction will create a standalone Chrysler that is financially stronger, with a winning combination of people, industry know-how, operational expertise and spirit of innovation that will accelerate the company's recovery and help us regain our position as a competitive industry leader.
“Cerberus is the right strategic buyer for Chrysler, with a long-term commitment to Chrysler's growth and success. They are committed to working constructively with both union leadership and Chrysler's management team to help Chrysler realize its full potential. There are no new job cuts planned in connection with this transaction announced today.
“As a private company, Chrysler will be better positioned to focus on its long-term plan for recovery, rather than just short-term results. It will allow Chrysler to renew its focus on what has always made us special—our passion, creativity and commitment to delivering exciting Chrysler, Jeep and Dodge vehicles and quality Mopar parts to our customers, along with unparalleled customer service.
“With strong backing from Cerberus and a continued relationship with Daimler, Chrysler must demonstrate once and for all that we can win in this global marketplace. It is ours to win. And Chrysler has it in its DNA to do just that.”
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