Abu Dhabi Firm Buys 9.1% of Daimler
MARCH 23, 2009
Parent of Mercedes Secures $2.65 Billion of Private Funds at a Time When Rivals Seek Government Aid
By CHRISTOPH RAUWALD
Daimler AG, the owner of Mercedes-Benz, will cede a 9.1% stake to an Abu Dhabi investment firm in a move that shores up its balance sheet and tamps down fear that activist shareholders could push for a strategic shift.
The deal, worth $2.65 billion to Daimler, will set Aabar Investments PJSC as the largest single stakeholder in the Stuttgart-based auto maker, raising the amount of Middle Eastern ownership of the company significantly. When the deal was announced Sunday, Kuwait was the company's largest shareholder, with a stake of about 7.6%.
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Daimler CEO Dieter Zetsche.
"The best time to invest is when people panic," said the chairman of Aabar Investments, Khadem Al Qubaisi. "We're buying a high-quality asset here," he said, adding in an interview that Aabar views the Daimler deal as a long-term investment.
But Mr. Al Qubaisi said he has "no plans at all" to invest in one of the troubled U.S. auto makers. "I'm not interested," he said.
Day Ahead: Stocks Soaring on Plan for Toxic Assets
Dow Jones Newswires' Simon Constable says investors are focused on the Treasury's new plan to use public and private money to buy up toxic assets. Plus news that Daimler has a new investor and the Chinese will continue buying U.S. government debt.
While Daimler hasn't experienced the same weakness as some of its U.S. counterparts in the auto industry, the German company has been under financial pressure in recent quarters due to deep sales declines in several regions. Its ability to court private investment amid the global credit crisis contrasts with its rivals, which have appealed for federal aid to stay afloat.
General Motors Corp. is surviving thanks to a $13.4 billion loan from the U.S. government, and has appealed to Germany for several billion dollars more that is needed to salvage its struggling European arm. The Detroit auto maker had failed last year to find private investors and other lenders to invest in its struggling operation, leading it to appeal to the U.S. Congress and the White House for aid.
Daimler had swung into the red in the fourth quarter 2008 due to a slump at its core Mercedes-Benz Cars unit and a painful loss on its stake in Chrysler LLC, which also received U.S. assistance. Daimler expects a loss in the first quarter of 2009 as well.
Following a bleak outlook with significantly lower vehicle sales this year compared with 2008, Daimler expects vehicle sales and earnings to recover slightly in 2010.
"We are delighted to welcome Aabar as a new major shareholder that is supportive of our corporate strategy. We look forward to working together to pursue joint strategic initiatives," Daimler Chief Executive Dieter Zetsche said.
Daimler said the cooperation will focus on joint initiatives in the areas of electric vehicles, the development of innovative compound materials to be used in automotive manufacturing and social projects such as the establishment of a training center in Abu Dhabi to educate young people for positions in the auto industry.
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Aabar is listed on the Abu Dhabi Securities Exchange and invests in sectors such as energy, infrastructure, real estate, automotive and financial services. Its largest shareholder is the International Petroleum Investment Co., or IPIC, which is owned by the government of the Emirate of Abu Dhabi.
Aabar will take its stake as Daimler issues additional share capital.The issue price of the new stock, representing a capital increase of around 10%, is â‚¬20.27 per share. On Friday, Daimler shares closed at â‚¬21.34 in Frankfurt, down 1.8%. The auto maker will issue about 96.4 million new shares; shareholders last year had approved the capital increase.
Daimler said the stake of Kuwait, so far the company's largest shareholder, will decrease to 6.9% from its previous level, around 7.6%, following the capital increase.
In a statement, Daimler said that a total investment of â‚¬1.95 billion ($2.65 billion) "further strengthens Daimler's sound capital base and offers additional flexibility to invest in new automotive technologies."
Daimler's large free float of around 92% had fueled concerns in recent months over activist shareholders possibly taking a stake and pushing for a strategic shift, such as a potential spin-off of the truck division.
Most of Daimler's European peers are shielded by a dominant shareholder, such as Porsche Automobil Holding SE at Volkswagen AG, the Quandt family at BMW AG and the Peugeot family at French car maker PSA Peugeot CitroÃ«n.
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