STUTTGART, Germany - DaimlerChrysler AG announced Monday that Cerberus Capital Management, a private equity firm, will take over a majority interest in Chrysler Group and the related financial services business for $7.4 billion. DaimlerChrysler will retain a 19.9 percent interest.
A new company will be formed by Cerberus, Chrysler Holding LLC.
The transaction is expected to be completed by the third quarter of 2007.
Due to the new corporate structure, the name of DaimlerChrysler AG will be renamed Daimler AG. The final decision on the name change will be made at an Extraordinary Shareholders' Meeting in the fall of 2007.
"We're confident that we've found the solution that will create the greatest overall value - both for Daimler and Chrysler. With this transaction, we have created the right conditions for a new start for Chrysler and Daimler," said Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler AG and Head of the Mercedes Car Group.
Ron Gettelfinger, President of the United Autoworkers (UAW) said, "The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler. We are pleased that this decision has been made, because our members and the management can now focus entirely on the development and manufacture of quality products for the future of the Chrysler Group."
"We welcome Chrysler into the Cerberus family of companies and believe Cerberus will be a good home for Chrysler. Cerberus believes in the inherent strength of U.S. manufacturing and of the U.S. auto industry. Most importantly, we believe in Chrysler," stated John W. Snow, Chairman of Cerberus Capital Management.
As part of the transaction, Chrysler Holding will hold 100 percent each of the future Chrysler Corp. LLC, which produces and sells Chrysler, Dodge and Jeep vehicles, and the future Chrysler Financial Services LLC, which provides financial services for these vehicles in the NAFTA region.
Of the total capital contribution of $7.4 billion, $5.0 billion will be go to the industrial business (Chrysler Corp. LLC) and $1.05 billion will be used in the financial services business in order to strengthen the equity base of both businesses.
DaimlerChrysler will receive the balance of $ 1.35 billion and will also grant a loan of $0.4 billion to Chrysler Corp. LLC.
According to the agreement, upon the closing of the transaction, DaimlerChrysler will transfer the industrial business of the Chrysler Group free of debt. The overall net cash outflow resulting from the transaction will $0.65 billion.
Financial obligations for Chrysler Group’s employees’ pension and healthcare benefits will be retained by the Chrysler companies.
Cerberus Capital Management, L.P., New York, a private investment firm, has about $23.5 billion under management in funds and accounts.
