–Boundary_(ID_Y9ukKx0YnNNSW3z0i3nHBw)
Content-typ e: message/rfc822
From: Mihran Toumajan <[email protected]>
Subject: Schrempp Wins Big In High-Profile Case; Ruling setback for Kerkorian
MIME-version: 1.0
Content-type: text/plain; charset=us-ascii
Content-transfer-encoding: 7BIT
DCX’s Schrempp wins big in high-profile case
Ruling is setback for billionaire investor Kirk
Kerkorian, who sued on fraud claims.
The Detroit News
Friday, April 8, 2005
By Christine Tierney and Ed Garsten
DaimlerChrysler AG CEO Juergen Schrempp won a big victory Thursday
against a bitter adversary after a U.S. judge cleared him of fraud
charges leveled by Las Vegas billionaire Kirk Kerkorian.
U.S. District Judge Joseph Farnan said Kerkorian, Chrysler’s biggest
investor in 1998 when Germany’s Daimler-Benz AG acquired Chrysler
Corp., was a sophisticated investor who had failed to prove that he
had been misled about the nature of the deal.
Kerkorian and his investment arm, Tracinda Corp., sought more than $1
billion in damages from Schrempp and DaimlerChrysler, claiming that
then-Daimler-Benz CEO Schrempp never intended the deal to be a merger
of equals, although the deal was described that way at the time.
In a 125-page ruling, Farnan said Tracinda appeared in 1998 to be
concerned primarily with the prospect of financial gain.
“Tracinda did not find corporate governance or the ‘merger of equals’
label to be important at the time of the merger,” Farnan wrote.
“Kerkorian supported the merger and thought there ‘would be good
value’ in the transaction before he had any discussions about
corporate governance.”
The judge agreed with DaimlerChrysler’s defense that it had complied
with the deal’s terms as they were spelled out in the proxy statement
and other documents vetted by Kerkorian’s counselors and lawyers.
Although Kerkorian is weighing an appeal, Farnan’s ruling comes as a
huge relief to Schrempp, who is still trying to restore the
profitability of his auto empire. Chrysler has recovered from heavy
losses to become profitable, but Mercedes is now struggling to improve
earnings and quality.
Financial analysts said the company could afford the damages, but a
victory was the best outcome. As for Schrempp, “he dodged a bullet,”
said analyst David Healy at Burnham Securities.
Kerkorian filed suit against Schrempp and other DaimlerChrysler
officials in 2000, citing two interviews in which Schrempp appeared to
suggest that he always intended the deal to be a takeover. In that
case, Kerkorian argued that he was entitled to a takeover premium for
his stake.
The value of Kerkorian’s Chrysler stake soared from just under $3.7
billion to $4.8 billion after the deal was announced. But his
attorneys argued that Tracinda would have received more if
Daimler-Benz had openly proposed a takeover.
“By calling the transaction a merger of equals, Daimler saved $7
billion to $8 billion in the acquisition, Chrysler management got
rich, and Chrysler shareholders got cheated out of a control premium,”
Kerkorian attorney Terry Christensen said last year.
In a notorious interview with Britain’s Financial Times newspaper in
November 2000, Schrempp said he had always wanted to make Chrysler a
division but had gone about it in a “round-about” way for
psychological reasons.
In another interview with Barron’s, he said he had what he wanted: “I
have Daimler, and I have divisions.”
In a 13-day trial in Wilmington, Del., Schrempp did not deny the
statements but said he was misinterpreted. He said his intention had
been to structure Chrysler’s operating business as a division of the
new company, much like Mercedes-Benz.
Kerkorian’s attorneys also pointed to the shrinking number of former
Chrysler officials on the DaimlerChrysler management board — only one
when the trial ended in February 2004 — as further evidence of a
German takeover.
Kerkorian testified in court that he had relied on assurances from
former Chrysler Chairman Bob Eaton that the deal would be a merger of
equals.
But Farnan said Kerkorian should not have relied only on his
“reasonably general” talks with Eaton, as he had thorough access to
details of the negotiations.
The 87-year-old casino mogul had appointed a representative on
Chrysler’s board — James Aljian — after his own aborted takeover bid
in 1995.
That year, Kerkorian also hired Jerry York, Chrysler’s former CFO, who
was concerned that the Auburn Hills automaker might run into serious
difficulties if it did not pair up with a strong automaker.
“The court cannot ignore the sophistication of Tracinda as an investor
and its subjective views regarding the transaction in light of the
information that was available to it, which was far more than that
which is available to the average investor,” Farnan wrote.
Before the trial began, DaimlerChrysler settled similar suits from
other investors claiming to have been duped.
“While we are clearly disappointed in today’s judgment, we are pleased
that other DaimlerChrysler shareholders who followed Tracinda’s lead
and filed lawsuits based on our exact claims … were successful in
reaching a settlement with DaimlerChrysler for $300 million,”
Christensen said. “It is obvious that, as an individual shareholder,
Tracinda was held to a different standard.
You can reach Christine Tierney at (313) 222-1463 or
[email protected].
*********************************************
Tracinda vs. DaimlerChrysler: A bitter trial
Kerkorian’s claim:
Daimler-Benz executives duped investors by billing the
1998 deal as a “merger of equals” when they planned a
takeover, robbing Chrysler shareholders of a takeover
premium. He relied on published comments by
DaimlerChrysler CEO Juergen Schrempp that he always
wanted Chrysler as a division.
DaimlerChrysler’s defense:
Kerkorian, with a representative on the Chrysler board
at the time of the merger, was intimate with and
approved all details of the discussions and terms of
the final combination agreement. Kerkorian made $2.7
billion on the deal and didn’t object to it at the
time. DaimlerChrysler complied with all contract
terms.
What the judge found:
Kerkorian, Chrysler’s largest shareholder, was a
“sophisticated investor” who should have known that
the “merger of equals” tag was a “promotional phrase”
that was “vague”. Kerkorian “wouldn’t have reasonably
relied on” such representations for “such a complex,
multi- billon-dollar transaction.”
__________________________________________________
Do You Yahoo!?
Tired of spam? Yahoo! Mail has the best spam protection around
–Boundary_(ID_Y9ukKx0YnNNSW3z0i3nHBw)–
http://www.detnews.com/2005/autosinsider/0504/10/C01-143977.htm
http://mail.yahoo.com