Cerberus Takes Over Majority Interest in Chrysler Group and Related Financial Services Business for EUR 5.5 Billion ($7.4 billion) from
DaimlerChrysler
HIGHLIGHTS
* Affiliate of Cerberus to acquire 80.1% equity interest in new company Chrysler Holding LLC; DaimlerChrysler AG to retain 19.9%
* Obligations for pensions and healthcare costs to be retained by Chrysler companies
* Transaction expected to result in net cash outflow of EUR 0.5 billion for DaimlerChrysler
* DaimlerChrysler’s net profit according to IFRS in 2007 to be reduced in a range of EUR 3-4 billion
* Equity ratio of DaimlerChrysler’s industrial business is expected to be over 40% by the beginning of 2008
* Extraordinary Shareholders’ Meeting to decide on change of name to Daimler AG
TRANSACTION STRUCTURE
An affiliate of private equity firm Cerberus Capital Management, L.P., New York, will make a capital contribution of EUR 5.5 billion ($7.4 billion) in return for an 80.1% equity interest in the future new company, Chrysler Holding LLC. DaimlerChrysler will hold a 19.9% equity interest in the new company. Chrysler Holding LLC will hold 100% each of the future Chrysler Corporation 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 EUR 5.5 billion, EUR 3.7 billion will flow into the industrial business (Chrysler Corporation LLC) and EUR 0.8 billion will flow into the financial services business in order to strengthen the equity base of both businesses. DaimlerChrysler will receive the balance of EUR 1.0 billion. In addition, DaimlerChrysler will grant a loan of EUR 0.3 billion to Chrysler Corporation LLC.
According to the agreement, upon the closing of the transaction, DaimlerChrysler will transfer the industrial business of the Chrysler Group completely free of debt. Due to the Chrysler Group’s anticipated negative cash flow until closing in connection with its restructuring plan, the transaction will give rise to a cash outflow of EUR 1.2 billion for DaimlerChrysler. The overall net cash outflow resulting from the transaction will therefore be EUR 0.5 billion. In addition, DaimlerChrysler will have to discharge long-term liabilities of the Chrysler Group in connection with the transaction. This will result in prepayment compensation of approximately EUR 650 million, to be borne by DaimlerChrysler. The usual transaction costs will also be incurred.
The Chrysler Group’s financial obligations for pension and healthcare benefits towards its employees and the employees of the financial services business related to the Chrysler Group will be retained by the Chrysler companies. The pension plans are significantly over-funded at present.
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05 M6 YJ GTO 1 of 447 12.767@109.93
