Blue Light special in aisle 4-Chrysler Group!
Investors circle Chrysler
Distribution of the detailed prospectus is the first step in a lengthy process that could lead to the sale of Chrysler to a private-equity firm or a rival automaker such as General Motors Corp.
Only a limited number of potential buyers will be given the document prepared by J.P. Morgan Chase & Co., the investment banker hired by DaimlerChrysler to manage a possible sale.
"We are not going to let every single company in the world in here," said one person close to Chrysler. "Serious companies are going to get a peek under the tent."
People familiar with the situation said a handful of blue-chip, private-equity firms are already slated to receive the document, including Cerberus Capital, Apollo Management, the Carlyle Group and the Blackstone Group.
In addition, GM and several foreign auto companies will also likely get the prospectus that breaks down Chrysler's assets, liabilities and future product plans and sales projections.
A sale or spin-off of Chrysler is among the options under active consideration by its German parent, DaimlerChrysler.
The stunning decision to put Chrysler on the block came Feb. 14, the same day that a sweeping restructuring was announced for the troubled U.S. unit.
Potential bidders surface
Since then, several potential bidders have surfaced in the private investment community, according to people close to Chrysler.
One auto analyst said Friday that firms such as Cerberus and Apollo may view Chrysler as an attractive turnaround candidate that could be sold off or broken up down the road.
"The private-equity firms are funds that have a defined investment horizon of five to seven years," said John Casesa of the Casesa Shapiro Group. "Any investment they make, they need to liquidate it and return the capital to investors."
If Chrysler were acquired by a private-equity firm, the buyer would likely own it for a period of time and then take it public with a stock offering.
A second option would be to sell a revived Chrysler to another automaker, or break up its brands and operations for sale individually.
While private-equity firms have huge war chests to spend on distressed companies, Chrysler's problems could make it a tough sell.
The former No. 3 U.S. automaker lost $1.5 billion last year and won't be profitable until 2008 at the earliest. Chrysler's truck-heavy lineup is also under increasing pressure in a market tending toward more fuel-efficient cars and crossover vehicles.
"Chrysler will not be a typical candidate for private-equity acquisition because it's very cyclical and capital intensive," Casesa said. "I think it could be viewed as a risky investment."
To soften the risk, a private-equity buyer could team up with an established automaker to purchase Chrysler.
A private investor would provide capital, while the automotive partner would join with Chrysler on vehicle platforms and manufacturing. Chrysler's minivan and Jeep SUV architectures would be valuable to competitors such as GM.
GM, DCX are in talks
GM has been in high-level talks with DaimlerChrysler for at least two months about acquiring Chrysler, people close to the companies have told The Detroit News. GM has also explored sharing vehicle platforms for SUVs and small cars with Chrysler.
Industry insiders have speculated whether GM could link up with Cerberus, for example, to take on Chrysler.
Last year, Cerberus bought a 51 percent interest in General Motors Acceptance Corp., GM's highly profitable finance arm. Cerberus also is a lead player in a bid to buy the bankrupt Delphi Corp., GM's largest parts supplier.
GM has declined to comment on Chrysler. Other automakers -- including Volkswagen AG, the Renault-Nissan alliance and Hyundai Motor Co. -- have denied any interest in bidding for the Auburn Hills-based automaker.
But that could change once the prospectus is issued. People close to Chrysler said they expect other automakers to at least examine the document and size up a once-in-a-decade opportunity to buy a major competitor.
The process will be tightly controlled, with interested parties required to sign nondisclosure agreements before receiving the prospectus. Overall, the number of bidders will be limited based on size, experience and credibility.
"It's not an auction in the American sense of the word," said one person familiar with the process.
Chrysler team in place
A team of Chrysler executives and specialists has already been formed to field inquiries from potential buyers. Typically, a private-equity firm reviews a prospectus, and then digs deeper into various aspects of the document.
Sources close to DaimlerChrysler said Chief Executive Dieter Zetsche hopes to offer a progress report on Chrysler at the German automaker's annual meeting on April 4 in Stuttgart.
DaimlerChrysler shareholders are pushing hard for a swift resolution. Since Feb. 14, the reaction among shareholders has been near-euphoric to the idea that the nine-year marriage of Daimler-Benz AG and Chrysler Corp. will be dissolved.
However, sources in the investment community said a negotiated purchase of Chrysler will take several months, particularly if a bidding war erupts among interested buyers.
The critical issue will be what price DaimlerChrysler expects for an enormous organization with more than 80,000 employees and annual revenues of $62 billion.
Several industry analysts have put Chrysler's value between $5 billion to $7 billion, but estimate its health care liabilities for workers at about $18 billion.
One potential investor told The News that the amount of debt and the size of the health care bill attached to Chrysler will have a significant impact on the potential price of a deal.
News that DaimlerChrysler is expected to put out its prospectus soon boosted the company's share price again Friday. DaimlerChrysler stock closed at $70.92, up 94 cents, in trading on the New York Stock Exchange.
-- "If they pull a knife, you pull a gun. If they put one of yours in the hospital, you put one of theirs in the morgue." Sean Connery, "The Untouchables"