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15. May 2007

Cerberus buys Chrysler for €5.5bn

Troubled American carmarker Chrysler has become the latest big-name business to fall into private equity hands.

 

DaimlerChrysler announced this morning that it has agreed to sell its Chrysler division to private equity firm Cerberus for €5.5bn (£3.75bn) - a fraction of the price it paid nearly 10 years ago.

 

Cerberus will own 80.1% of the demerged Chrysler Holdings, with Daimler retaining 19.9%.

 

The move brings to an end a troubled decade for the merged company, which was created in 1998 when Daimler paid $35bn (£21bn at 1998 exchange rates) for its US rival.

Chrysler has since suffered from falling sales, down 7% in the US last year, in the face of fierce competition from Japanese rivals. It announced 13,000 job cuts earlier this year.

 

Following the merger, DaimlerChrysler was sued by shareholders angry that it had overpaid for Chrysler.

 

Dr Dieter Zetsche, chairman of the German company, said the sale would allow both companies to look towards a brighter future.

 

"With this transaction, we have created the right conditions for a new start for Chrysler and Daimler," said Dr Zetsche.

 

The acquisition has been supported by American unions.

 

"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," said Ron Gettelfinger, president of the United Autoworkers (UAW).

 

The private equity group's chairman, John Snow, thanked DaimlerChrysler for "their good stewardship of this American icon over the last decade".

 

"We are aware that Chrysler faces significant challenges, but we are confident that they can and will be overcome. A private investment firm like Cerberus will provide management with the opportunity to focus on their long-term plans rather than the pressures of short-term earnings expectations," Mr Snow claimed.

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