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| EC
approves Cerberus acquisition of Chryslernews |
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| 05 July 2007 |
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Mumbai:
The European Commission has approved the acquisition
of US carmaker Chrysler from DaimlerChrysler by US buyout
firm Cerberus Capital Management. The deal, valued at
$7.4 billion, marks the first time a private equity
company acquires one of the world''s biggest automakers.
The EC approved the deal under a special simplified
procedure because neither customers nor competitors
had lodged any objections, the Commission said.
DaimlerChrysler agreed in May to sell most of its stake
in the loss-making Chrysler Group and its related financial
services business to Cerberus.
Under the terms of the new deal, Cerberus Capital Management
will get an 80.1-per cent stake in Chrysler and its
related financial services business.
Cerberus will pay the $7.4 billion as a capital contribution
to a new Chrysler holding company. Of that, $6.05 billion
will be put into Chrysler - $5 billion into the industrial
operations and $1.05 billion into financial services.
DaimlerChrysler will get the remaining $1.35 billion,
which in turn will loan $405 million to Chrysler.
The German company, whose name will change to Daimler
AG if shareholders approve the divestment, will contribute
$880 million to cover long-term liabilities at Chrysler.
It marks the first time a Big Three US automaker will
be run by a private equity company, and requires Cerberus
to contribute more than $6 billion to shore up the balance
sheet of the struggling automaker and its finance arm.
Daimler agreed to kick in $1.55 billion, or €1.15
billion, to Chrysler in order to exit a nine-year-old
merger that had failed to deliver on its promise to
create a global automotive powerhouse.
The
deal, also cleared by the US Federal Trade Commission
last month, marks the end of the 1998 merger between
Germany''s Daimler-Benz and Detroit-based Chrysler Group,
one of the most spectacular deals in automotive industry.
Daimler paid $36 billion for Chrysler at the time, but
it has since seesawed between making a profit and a
loss. It reported a $1.5 billion loss in 2006 and expects
losses to continue in 2007 as it faces relentless competition
from Asian and European rivals.
The deal, which is expected to close in the third quarter,
still needs approval from the US regulators.
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