Equity Firms Explore Chrysler Buy

Equity Firms Explore Chrysler Buy

By Michelle Krebs February 23, 2007

Private equity firms appear far more interested in buying Chrysler than do other automakers.

At least four private equity firms have been in preliminary talks with DaimlerChrysler about buying the Chrysler Group, the Financial Times  in London reports today on its Web site. Private equity firms -- or a consortium of such firms -- had been expected to take a look at Chrysler. They are: Apollo Management LP, the Blackstone Group, the Carlyle Group, and Cerberus Capital Management LP.

The FT also reported several European firms were contacted about their potential interest in buying the firm.

Meantime, the list of automakers as possible suitors shortens as more take themselves out of the running. Among those who claim they are not interested are Nissan-Renault, Volkswagen, Hyundai, Mitsubishi and Fiat.

General Motors still is not commenting. However, the FT is reporting that Fritz Henderson, GM'’s chief financial officer, has assembled a working group to study a possible purchase, alliance or other tie-up with Chrysler. Henderson led a similar group last year that examined, then rejected, a possible alliance with Renault and Nissan.

Who they are

The list of U.S. private equity firms reportedly interested in Chrysler are familiar names.

Apollo Management: Based in New York City, Apollo Management LP was founded in 1990 by Leon Black of Apollo Advisors. One of its high-profile acquisitions was Harrah Entertainment, purchased in partnership with Texas Pacific Group for $17.1 billion late last year. Recently, it also bid for Realogy Corp., which has real estate holdings, including Coldwell Banker. It also has made a nearly $2 billion bid for Countrywide, a chain of real estate brokers in Britain.

Apollo has invested in a wide range of companies from AMC Entertainment, Linens ‘n Things, General Nutrition Centers and whirlpool-maker Jacuzzi to manufacturing firms, like Hexion Specialty Chemicals, Nalco Chemical (in which Blackstone also was an investor), and GE’s Advanced Materials, which it bought for $3.8 billion in cash and securities and renamed "Momentive Performance Materials."

The Blackstone Group: Founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman, Blackstone targets equity investments of up to $125 billion. It handled the restructuring of communications giant Global Crossing and was appointed Enron’s advisor in its restructuring.

It has invested in more than 100 companies in a variety of industries including entertainment, communications, food and health care. Its most recent investment is $2 billion for food distributor, Pinnacle Foods Group, which has such well-known brands as Duncan Hines, Vlasic, Swanson, and Aunt Jemima.

Blackstone is familiar with the auto industry and Detroit. It invested in TRW Automotive, and, even more high profile, was its 1988 investment in the struggling Collins & Aikman Corp., a Detroit-based manufacturer of automotive components.

In 2003, David Stockman, former U.S. representative to Congress from Michigan and later President Ronald Reagan’s head of Office of Management and Budget, made himself CEO. He was ousted in 2005, the day before the company filed Chapter 11.

The Carlyle Group: Established in 1987, The Carlyle Group is one of the world’s largest equity firms with $54.5 billion under management and offices across the globe. However, it appears it has done little in the automotive sector, with Hertz rental car company being the most well-known one and, in Detroit, auto supplier Key Plastics.

Cerberus Capital Management LP: Founded in 1992 and based in New York City, Cerberus Capital Management LP is a large privately owned hedge fund run by financier Steve Feinberg. Former Secretary of the Treasury John Snow was appointed its chairman last October. Former Vice President Dan Quayle runs one of its international units and has been a prominent spokesperson for the firm. Former Ford executive David Thursfield heads its automotive unit.

With holdings of $16 billion in 2005, Cerberus invests primarily in companies near bankruptcy.

Cerberus has become a familiar name in Detroit of late. It planned a $3.4 billion investment in Delphi Corp., the auto supplier giant formed from GM’s parts operations that filed for Chapter 11 last October. Cerberus has said it may drop its planned investment because the United Auto Workers union is resisting its proposals for pay cuts.

Also in recent months, Cerberus purchased the flooring and acoustics business of auto supplier Collins & Aikman.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.