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PRINT THIS PAGE Cerberus buys majority stake in Chrysler for $7.4bn from DaimlerChrysler14/05/2007. Source: AltAssets. 
 New York-based private equity firm Cerberus Capital Management has agreed to acquire an 80.1 per cent equity interest in Chrysler Holding from DaimlerChrysler for $7.4bn. Chrysler Holding will own the future Chrysler Corporation, which produces and sells Chrysler, Dodge and Jeep vehicles, and the future Chrysler Financial Services, which provides financial services for these vehicles in the NAFTA region. DaimlerChrysler will hold the remaining 19.9 per cent stake in Chrysler Holding.
Of the total capital contribution of $7.4bn, $5bn will flow into the industrial business (Chrysler Corporation) and $1.05bn will flow into the financial services business in order to strengthen the equity base of both businesses. DaimlerChrysler will receive the balance of $1.35bn. In addition, DaimlerChrysler will grant a loan of $0.4bn to Chrysler Corporation.
Upon the closing of the transaction, DaimlerChrysler will transfer the industrial business of the Chrysler Group completely free of debt, according to a statement. 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 $1.6bn for DaimlerChrysler. The overall net cash outflow resulting from the transaction will therefore be $0.65bn. 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 $878m, to be borne by DaimlerChrysler.
Cerberus chairman John W Snow said, 'We welcome Chrysler into the Cerberus family of companies and believe Cerberus will be a good home for Chrysler. Cerberus believes in the inherent strength of US manufacturing and of the US auto industry. Most importantly, we believe in Chrysler.'
Daimler-Benz bought Chrysler for $36bn in 1998. Blackstone and Centerbridge were reportedly also interested in buying Chrysler.
Copyright © 2007 AltAssets
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