Kirk Kerkorian, once the biggest shareholder of Chrysler Corp., has reportedly sent a letter to DaimlerChrysler offering to buy the struggling automaker back for $4.5 billion. Kerkorian’s offer for Chrysler seems to have strengthened the position of DaimlerChrysler in the sale of its US subsidiary, sending the German parent’s shares to their highest level since 1999. Kerkorian’s letter also offers DaimlerChrysler a $100 million escrow fee, a quarter of which he said he would forfeit if he were to walk away from the deal after conducting due diligence.
Kerkorian has though proposed to take the struggling automaker private, but his claim is dependent upon realizing a deal on a new labor agreement with the United Auto Workers union, which could end up with part-ownership of the troubled automaker. However, analysts have extended mixed standpoints on how much workers might be prepared to give the billionaire investor.
In addition to it, market is still waiting to see whether Kerkorian, who has claimed that he is dedicated to a long-term approach to solve Chrysler’s problems, would be considered as the best candidate for the union’s support. Therefore, the offer is conditional on reaching a satisfactory labour contract with the UAW, and with Daimler on sharing pension liabilities and retiree health care costs.
Kerkorian’s holding company, Tracinda, is contending for the ownership of Chrysler against three other potential bids in the fray. The other bids include Blackstone with Centerbridge; Cerberus Capital Management; and the third is from Magna, the Canadian vehicle components maker, in partnership with private equity firm Ripplewood. Interestingly, Tracinda, Kerkorian’s investment arm, is still to have Chrysler’s books to which other bidders have already gained access.
However, some experts have said that the surprise bid could jump-start an auction for the automaker. While others contended that the offer was at the low end of approximation for the value of the business. Besides, Kerkorian’s bid contains potential some major elements of impediments such as a condition that Chrysler reach an amicable conclusion of contract-talks with UAW.
