CORRECTED-Cerberus to buy majority of Chrysler for $7.4 bln
(Corrects reference to new company in eighth paragraph, making clear name will change, not revert, to Daimler AG)
FRANKFURT (Reuters) - Private equity firm Cerberus will buy the majority of DaimlerChrysler's struggling Chrysler Group for $7.4 billion, a fraction of the $36 billion deal that created the transatlantic car union nine years ago.
Cerberus Capital Management gets an 80.1 percent stake in Chrysler and its related financial services business, DaimlerChrysler said on Monday, ending what was billed as a marriage made in heaven but never lived up to the name.
The deal, months in the making, puts a major U.S. automaker in the hands of a private equity group for the first time.
"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," Chrysler President Tom LaSorda said.
The deal will not trigger any job cuts beyond the 13,000 Chrysler announced in February, when it unveiled a $1.5 billion 2006 operating loss as customers, spooked by high fuel prices, fled its lineup of pickup trucks and sport utility vehicles.
The deal breaks up a product lineup that yoked American mass-market brands Jeep, Dodge and Chrysler with Germany's premium Mercedes-Benz, luxury Maybach and Smart minicar brands at a time of wrenching restructuring for the U.S. auto industry.
The accord calls for Chrysler to retain billions of dollars in pension and healthcare obligations for its workers and will result in a net cash outflow of 0.5 billion euros ($677 million) for DaimlerChrysler, now the world's fifth-biggest carmaker.
The German company -- whose name will change to Daimler AG if shareholders approve -- will contribute another 650 million euros to cover long-term liabilities at Chrysler, it said.
It estimated the deal will cut DaimlerChrysler's 2007 net profit by 3-4 billion euros.
DaimlerChrysler stock rose as much as 7.8 percent on the news and was up 4.3 percent at 63.24 euros by 1125 GMT, by when more than three times a normal day's volume had traded.
"Even though I don't think there is a very strong valuation story, there is a very strong visibility story. One of the great parts of uncertainty surrounding Daimler is now not so uncertain," said Nomura analyst Michael Tyndall.
UNION WELCOMES DEAL
Dismayed by its volatile earnings, DaimlerChrysler put Chrysler up for sale in February.
Bidders that publicly said they were vying for Chrysler are Kerkorian's Tracinda Corp. and Canadian autoparts maker Magna International. Private equity firm Blackstone Group also pursued Chrysler, and was said to be linked up with smaller buyout firm Centerbridge Partners. Continued...
