Join Date: Jun 2001
Location: Windsor, Ontario
more legal problems.
DCX hit by 3rd suit over merger
Reuters / May 25, 2004
PHILADELPHIA -- DaimlerChrysler has been hit by a third lawsuit claiming that the 1998 deal that formed the German-U.S. automaker cheated investors out of billions of dollars because it was deceptively billed as a "merger of equals" rather than a takeover.
The latest lawsuit, filed in U.S. District Court in Delaware on Monday on behalf of investors outside the United States, cites Daimler-Benz investment bankers' estimates that Chrysler was worth between $10 billion and $36 billion more than its shareholders received.
"While an acquisition would have resulted in a payment of a 'control premium' which would have pushed the acquisition premium well above 40 percent, the smaller premium received by shareholders of Chrysler was purportedly justified because control of DaimlerChrysler was to be shared by former management of both companies," according to the lawsuit, a copy of which was obtained by Reuters.
DaimlerChrylser is also being sued by billionaire investor Kirk Kerkorian, whose Tracinda Corp. was the largest shareholder in Chrysler at the time of the merger. Kerkorian is seeking $1.35 billion plus other expenses, saying he too was misled into believing the transaction was a merger of equals, depriving him of the "control premium."
Kerkorian's lawsuit was prompted by an October 2000 Financial Times interview in which DaimlerChrysler Chairman Juergen Schrempp, German mastermind of the merger, said he had intended Chrysler to become a division rather than an equal partner.
The new lawsuit contends that Schrempp and his allies cemented their takeover of the No. 3 U.S. automaker by naming former Daimler executives to key positions in the new company.
DaimlerChrysler settled the first legal challenge to the merger, a class-action lawsuit filed by U.S. investors, by agreeing to pay $300 million in August.
The latest lawsuit names Daimler-Benz, the merged company, Schrempp and other executives as defendants, claiming they "continuously misrepresented the true risks of investing in the company" and artificially inflated revenues and earnings while understating costs.
The plaintiff named is Markus Blechner, who bought shares in the merged company in Switzerland after the merger and sustained losses during a sharp fall in the share price.
Blechner is demanding a jury trial in the proposed class-action lawsuit alleging a number of U.S. securities law violations that hurt "thousands" of investors.
The merged company has failed to achieve its stated cost savings and there has been no dual operational structure, the lawsuit says.
"Conversely, what shareholders of the combined company have witnessed is the ultimate domination and control by the former members of Daimler-Benz who now monopolize direction over the combined company," it says.
DaimlerChrysler spokesman Han Tjan declined to comment on the new legal challenge against the company other than to call it a "strike suit," a legal term for an opportunistic attempt to make money.