Kerkorian Bids on Chrysler
By Michelle Krebs April 5, 2007We should have seen this coming, and, in fact, it was mentioned early on as a possibility. In fact, the only surprise is that it didn't happen earlier.
Las Vegas Billionaire Kirk Kerkorian, through his Tracinda investment firm, has launched a $4.5-billion bid to buy Chrysler.
"Tracinda intends to build and strengthen Chrysler as an independent entity by partnering with the United Auto Workers and senior management of Chrysler, and will offer the UAW and Chrysler management the opportunity to participate as equity partners in the transaction," Tracinda said in a press release today. "Tracinda believes by taking a long-term approach to solving Chrysler's problems, it can become a robust and lasting, stand-alone entity."
Kerkorian launched the bid via letters to DaimlerChrysler CEO Dieter Zetsche and DaimlerChrysler's board. The deal requires no financing but is subject to Tracinda reaching "an equitable arrangement with DaimlerChrysler regarding sharing of unfunded pension liabilities and healthcare costs."
The deal includes $100 million in cash up front for exclusivity. DaimlerChrysler reportedly has at least three bidders -- private equity firms Blackstone Group and Cereberus Capital Management and Canadian auto supplier Magna International likely with equity firm Ripplewood.
Kerkorian's bid should come as no surprise. He's tried this before and his name had been mentioned as a possible suitor for Chrysler. And only a week or so ago, Tracinda's No. 2 man, Jerome York, who had been Chrysler's CFO in the Lee Iacocca days, had given a speech in Michigan, saying any new owner of Chrysler would require a friendly agreement with the UAW.
Indeed, this is the second time Tracinda and Kerkorian has gone after Chrysler. Kerkorian and his Tracinda, along with York and Iacocca, went after Chrysler before Daimler-Benz bought the U.S. automaker.
Kerkorian also became the largest stockholder of General Motors a year ago, tried to put the pressure on GM to move faster to turn things around and got York a seat on GM's board. It was at the urging of Kerkorian and York that GM consider an alliance with Nissan-Renault, with Kerkorian's intention having that company's chief, Carlos Ghosn, run the merged empire. However, GM's board rejected an alliance with Nissan-Renault, prompting York to resign from the board in disgust and Kerkorian to sell his stake in GM.
The timing of Kerkorian's two Chrysler offers is ironic. The first time Kekorian and company went after Chrysler was 12 years ago. The announcement came just as then Chrysler CEO Bob Eaton was to take the stage as the keynote speaker at the New York auto show. The news, which came as a shock to Chrysler's then management, sent everyone into chaos. Reporters dashed for phones and computers while Chrysler temporarily postponed Eaton's speech. Ultimately, it was Eaton who agreed to the controversial "merger of equalities" between Daimler-Benz and Chrysler, which clearly became a flat-out purchase of Chrysler by Daimler that now wants to ditch it.
Today is the second press day of the New York auto show, which opens to the public on Friday.
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