By Chang-Ran Kim and Michael Shields
Fri Nov 11,11:38 AM ET
TOKYO/FRANKFURT (Reuters) - DaimlerChrysler AG drew the final curtain on its ill-fated investment in Mitsubishi Motors Corp. (MMC) on Friday by selling its entire 12.42 percent stake in the Japanese car maker.
Investment bank Goldman Sachs bought the shares and a financial source said it was in the process of placing them with institutional investors around the world.
DaimlerChrysler, the world's fifth-biggest carmaker, said that exiting the MMC investment, which it once saw as a pillar of its strategy of building a global car empire, would boost 2005 financial income by about 500 million euros ($590 million).
It paid 2.4 billion for the shares five years ago but had to swallow mounting losses amid a scandal over defect cover ups that cost MMC money and respect. Daimler took a hit of 665 million euros last year from its involvement in MMC.
The fate of DaimlerChrysler's reduced ownership of Japan's only unprofitable car maker had been a subject of speculation after the German-U.S. auto giant cut off its financial lifeline to its former affiliate in April 2004.
Stuttgart-based Daimler, which still has some close operational tie-ups with MMC 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 MMC would not be affected by Daimler's disposal of the shares, adding the companies planned to extend mutually beneficial projects.
Analysts lauded DaimlerChrysler's move and the stock rose 1.6 percent by 1445 GMT to 42.65 euros, outpacing a 1.3 percent gain by the DJ Stoxx European car sector index.
"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 a reduction of 8,500 staff at the premium Mercedes division in high-cost Germany, which will cost Daimler 950 million euros.
Morgan Stanley noted that MMC stock had traded as low as 72 yen after an in-house revolt forced Daimler Chief Executive Juergen Schrempp to pull the plug on financial aid. The stock closed at 299 yen, down 2.6 percent, before the news broke.
Several analysts and traders have said MMC stock is still substantially overvalued, with three brokerages polled by Reuters Estimates putting MMC's target price at 70 yen at most.
Daimler last year sold its stake in Korea's Hyundai Motor Co Ltd and is now 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.
MMC 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.
Goldman Sachs declined comment on its purchase of DaimlerChrysler's nearly 548.4 million MMC shares.
Since DaimlerChrysler refused to give MMC further help, the Japanese auto maker 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 MMC's top shareholder with a combined 13.9 percent as of end-September, the auto maker said.
Fri Nov 11,11:38 AM ET
TOKYO/FRANKFURT (Reuters) - DaimlerChrysler AG drew the final curtain on its ill-fated investment in Mitsubishi Motors Corp. (MMC) on Friday by selling its entire 12.42 percent stake in the Japanese car maker.
Investment bank Goldman Sachs bought the shares and a financial source said it was in the process of placing them with institutional investors around the world.
DaimlerChrysler, the world's fifth-biggest carmaker, said that exiting the MMC investment, which it once saw as a pillar of its strategy of building a global car empire, would boost 2005 financial income by about 500 million euros ($590 million).
It paid 2.4 billion for the shares five years ago but had to swallow mounting losses amid a scandal over defect cover ups that cost MMC money and respect. Daimler took a hit of 665 million euros last year from its involvement in MMC.
The fate of DaimlerChrysler's reduced ownership of Japan's only unprofitable car maker had been a subject of speculation after the German-U.S. auto giant cut off its financial lifeline to its former affiliate in April 2004.
Stuttgart-based Daimler, which still has some close operational tie-ups with MMC 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 MMC would not be affected by Daimler's disposal of the shares, adding the companies planned to extend mutually beneficial projects.
Analysts lauded DaimlerChrysler's move and the stock rose 1.6 percent by 1445 GMT to 42.65 euros, outpacing a 1.3 percent gain by the DJ Stoxx European car sector index.
"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 a reduction of 8,500 staff at the premium Mercedes division in high-cost Germany, which will cost Daimler 950 million euros.
Morgan Stanley noted that MMC stock had traded as low as 72 yen after an in-house revolt forced Daimler Chief Executive Juergen Schrempp to pull the plug on financial aid. The stock closed at 299 yen, down 2.6 percent, before the news broke.
Several analysts and traders have said MMC stock is still substantially overvalued, with three brokerages polled by Reuters Estimates putting MMC's target price at 70 yen at most.
Daimler last year sold its stake in Korea's Hyundai Motor Co Ltd and is now 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.
MMC 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.
Goldman Sachs declined comment on its purchase of DaimlerChrysler's nearly 548.4 million MMC shares.
Since DaimlerChrysler refused to give MMC further help, the Japanese auto maker 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 MMC's top shareholder with a combined 13.9 percent as of end-September, the auto maker said.
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