DaimlerChrysler sells Mitsubishi stake to Goldman Sachs

Nov. 11, 2005

DaimlerChrysler sells Mitsubishi stake to Goldman Sachs

Reuters

TOKYO -- DaimlerChrysler AG drew the final curtain on its
ill-fated investment in Mitsubishi Motors Corp. on Friday by selling its
entire 12.42 percent stake in the Japanese carmaker.
Investment bank Goldman Sachs bought the stake and was placing the
shares with institutional investors around the world, a financial source
said.
DaimlerChrysler, the world's fifth-biggest carmaker, said exiting the
Mitsubishi Motors investment that it once saw as a pillar if its
strategy of building a global car empire would boost 2005 financial
income by around 500 million euros ($589 million).
Goldman Sachs declined comment on its purchase of DaimlerChrysler's
nearly 548.4 million Mitsubishi Motors shares. The stock closed at 299
yen, down 2.6 percent, before the news broke. At full share value the
sale would be roughly $1.39 billion, but a source familiar with the
matter said DaimlerChrysler probably sold off the shares to for a
substantial discount of up to 18 percent of Mitsubishi Motors' current
share price.
Since DaimlerChrysler cut off its financial lifeline to its former
affiliate in April 2004, the Japanese automaker has been bailed out by
sister companies in the Mitsubishi group and investment funds through
their purchase of new shares, reducing Daimler's controlling 37 percent
stake.
If shares held by group companies are included, Mitsubishi Heavy
Industries Ltd. will still be Mitsubishi Motors' top shareholder with a
combined 13.9 percent as of end-September, the automaker said.
The Wall Street Journal reported that Ruediger Grube, a member of
DaimlerChrysler's management board who oversees the company's
cooperation with Mitsubishi, would resign from Mitsubishi's board.
Stuttgart-based DaimlerChrysler, which still has some close operational
tie-ups with Mitsubishi Motors such as the joint development of engines
and vehicle platform sharing, had repeatedly said it would hold on to
its former partner's stake.
The partners said existing projects with Mitsubishi Motors would not be
affected by DaimlerChrysler's disposal of the shares, adding that the
companies planned to extend mutually beneficial projects.
Analysts lauded DaimlerChrysler's move.
"Daimler showed good timing with the sale," said Michael Punzet, an
analyst at Landesbank Rheinland-Pfalz.
"The money will help offset the financial burden from its planned job
cuts," he added, referring to the reduction of 8,500 staff at the
premium Mercedes division in high-cost Germany.
DaimlerChrysler said the cuts would cost it 950 million euros ($1.1
billion) in total.

CASHING IN

Morgan Stanley noted that Mitsubishi Motors stock had traded as low as
72 yen after an in-house revolt forced DaimlerChrysler CEO Juergen
Schrempp to pull the plug on financial aid.
Analysts and traders have said Mitsubishi Motors stock is still
substantially overvalued, with three brokerages polled by Reuters
Estimates putting the target price at 70 yen at most.
DaimlerChrysler last year sold its stake in Korea's Hyundai Motor Co.
Ltd. and is divesting its heavy diesel motor unit MTU Friedrichshafen.
It could use the cash from asset sales to top up pension contributions,
finance restructuring of its Smart minicar business, invest in new
models or channel money to investors via steady or even sweeter
dividends, Morgan Stanley said.
Mitsubishi Motors on Thursday posted a smaller interim loss than it had
forecast but offered a cautious outlook for the second half. It still
expects to report a loss for the full year to March 2006 in what would
be its third straight year in the red.