A Suit To Undo The Chrysler Merger
Billionaire investor Kirk Kerkorian on Monday sued DaimlerChrysler AG for more than $8 billion, accusing the German automaker of deceiving shareholders when it bought Chrysler Corp. for $36 billion in 1998.
The lawsuit, filed in U.S. District Court in Delaware, charges DaimlerChrysler with "fraudulently inducing the 1998 vote of Chrysler shareholders" and "knowingly deceiving" shareholders and other parties by representing the deal as a "merger of equals".
The 83-year-old Kerkorian, who attempted to buy Chrysler in a 1995 unsolicited takeover, is DaimlerChrysler's third-largest shareholder with an approximate four percent stake through his Tracinda Corp. investment firm. He was Chrysler's largest shareholder before the deal, with a 13.75 percent stake.
Kerkorian said he would not have voted in favor of the transaction if he had known the company intended to "acquire and subjugate Chrysler, reduce it to division status and fire Chrysler's management."
"[DaimlerChrysler Chairman Juergen] Schrempp knew that Chrysler's directors and shareholders would never approve a transaction if he told the truth, namely, that a foreign corporation sought to acquire complete operating control of one of America's 'Big Three' auto manufacturers," according to the lawsuit.
At the time of the deal, Kerkorian issued a statement praising Chrysler's "bold initiative" and said the transaction would, "create substantial shareholder value by establishing a truly global automotive company."
DaimlerChrysler has come under fire for Chrysler's struggling operations and has replaced top American executives with German managers. The company also has been besieged by speculation that white-collar workers may be laid off, unions may be asked for givebacks and plants may be closed in order to pull Chrysler back into profitability.
Chrysler lost $512 million in the third quarter.
Furthermore, Schrempp has apologized for comments made to the Financial Times newspaper in which he said he lied to Chrysler executives in 1998 about the deal being a "merger of equals" in order to get the transaction completed.
DaimlerChrysler was trading Monday at about $40.20 a share on the New York Stock Exchange, up from a recent 52-week low of $37.90. The shares have fallen steadily since hitting an all- time high of more than $108 a share two months after the deal.
The lawsuit seeks more than $8 billion in damages and Kerkorian is also seeking to undo the Daimler-Chrysler deal to make Chrysler an independent corporation.
The suit contends that Schrempp approached Kerkorian and promised the deal would be a "merger of equals", indicating Chrysler would be run by its own management group.
"Daimler-Benz's assurances formed the foundation for Tracinda's decision to vote in favor of the business combination," the suit said.
In addition to the company, the lawsuit names Schrempp, Chie Financial Officer Manfred Gentz and supervisory board Chairman Hilmar Kopper.
A DaimlerChrysler spokeswoman reached in Frankfurt said she hadn't seen the suit and couldn't comment.