Kerkorian loses case against DaimlerChrysler
8 April 2005, WILMINGTON, DELAWARE - A US court in Delaware on Thursday rejected a complaint worth billions by investor Kirk Kerkorian against DaimlerChrysler that charged the company had deceived its investors when the two companies merged.
8 April 2005
WILMINGTON, DELAWARE - A US court in Delaware on Thursday rejected a complaint worth billions by investor Kirk Kerkorian against DaimlerChrysler that charged the company had deceived its investors when the two companies merged.
Kerkorian, 87, has sought as much as USD 3 billion (EUR 2.34 billion) in damages connected to the USD 36 billion (EUR 28 billion) merger in 1998 of the US automaker Chrysler Corporation and the German-based Daimler-Benz, which makes Mercedes.
Kerkorian was at one time the largest shareholder in Chrysler through his investment firm Tracinda.
US District Judge Joseph J. Farnan Jr. rejected Kerkorian's claims that Daimler-Benz executives had deceptively disguised the Chrysler acquisition as a merger of equals. Kerkorian's lawyers claimed the 'equals' argument was used to make it more acceptable to investors, and to avoid paying a takeover premium of USD 10 billion (EUR 7.8 billion).
"The court concludes that Tracinda has failed to prove its claims of common law fraud and violations" of securities laws, Farnan wrote.
Farnan said the court would not address the questions of damages.
Since the merger, shares in DaimlerChrysler, the world's fifth largest automaker, have lost more than half their value. During the same period, shares in Toyota rose 27 percent and BMW rose 60 percent, Bloomberg financial news service reported.
Kerkorian's lawyers argued that DaimlerChrysler chief executive Juergen Schrempp and other DaimlerChrysler executives had conducted a stealth takeover by saying it would be a corporate marriage with jobs evenly divided between German and American executives. Kerkorian contended that the German managers took control after the merger.
DaimlerChrysler's lawyers charged that Kerkorian's suit was sour grapes over his own failed 1995 takeover bid for Chrysler. They also argued that the billionaire suffered no loss from the combination.
Judge Farnan ruled that Kerkorian had backed the merger with full knowledge of the plans.
"Tracinda knew before it entered into the stockholder agreement that DaimlerChrysler would be incorporated as a German AG," or 'Aktiensgesellschaft', a public corporation, Farnan wrote. "Kerkorian himself supported the merger before he spoke to anyone regarding the governance of the new corporation."
Schrempp greeted Farnan's ruling in a statement issued in New York. "We are pleased that the court's decision confirms, once and for all, that the Tracinda case lacked any merit and that all claims against DaimlerChrysler relating to the 1998 merger were completely baseless," he said.
"We will continue to concentrate our efforts on making this merger a great success by implementing our strategy and optimising our operations in the US, in Germany and around the globe," he added.
On Wednesday in Germany, Schrempp admitted to shareholders that the company faced major problems at Mercedes and its minicar project, Smart, which would hurt 2005 earnings. The company would have to invest up to USD 1.54 billion (EUR 1.2 billion) in revamping the Smart division.
In previous years, much of the financial problems have been linked to Detroit.
Schrempp vowed that DaimlerChrysler's profits will show a clear upturn starting in 2006 as the company benefits from the effects of its 'CORE' programme to cut costs and from the introduction of new models.
Subject: German news