• Cerberus Takes Over Majority Interest in Chrysler Group

    chrysler

The Board of Management of DaimlerChrysler AG (stock-exchange abbreviation DCX) has today decided, subject to the approval of the Supervisory Board and the relevant authorities, on the future concept for the Chrysler Group and the realignment of DaimlerChrysler AG. Completion of the transaction is subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals and Cerberus financing arrangements.

Structure of the Transaction


  • An affiliate of private equity firm Cerberus Capital Management, L.P., New York, will make a capital contribution of $7.4 billion in return for an 80.1 percent equity interest in the future new company, Chrysler Holding LLC. DaimlerChrysler will hold a 19.9 percent equity interest in the new company. Chrysler Holding LLC will hold 100 percent 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 $7.4 billion, $5.0 billion will flow into the industrial business (Chrysler Corporation LLC) and $1.05 billion will flow into the financial services business in order to strengthen the equity base of both businesses. DaimlerChrysler will receive the balance of $ 1.35 billion. In addition, DaimlerChrysler will grant a loan of $0.4 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 $1.6 billion for DaimlerChrysler. The overall net cash outflow resulting from the transaction will therefore be $0.65 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 $878 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


Effects on Key Figures


The transaction will have the following effects on DaimlerChrysler AG:

  • In total, current estimates indicate that net profit according to IFRS in 2007 will be reduced by $4.1-5.4 billion
  • Due to the deconsolidation of the Chrysler companies and the resulting reduction in the balance-sheet total, the equity ratio of DaimlerChrysler’s industrial business is expected to increase to more than 40 percent by the beginning of 2008
  • There will be no changes relating to the bonds issued and guaranteed by DaimlerChrysler AG. In the financial services business for the Chrysler, Jeep and Dodge brands, Cerberus will take over the financing previously provided by DaimlerChrysler AG
  • The 19.9 percent equity interest held by DaimlerChrysler AG in the new company Chrysler Holding LLC will be included after closing at equity in the Van, Bus, Others segment
  • The closing of the transaction is expected to take place in the third quarter of 2007
Alina Moore
Alina Moore
Alina Joined the Topspeed.com team in the early 2000s as one of the outlets very first experts, and she’s been with Topspeed.com ever since. Over the years, she’s served various roles, but today she’s is relied on heavily to verify automotive facts, assist with formatting, and discover new and engaging topics.  Read full bio
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