Wall St warms to Chrysler buyout

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The Independent Online
Support for Kirk Kerkorian's audacious $22.8bn (£14.2bn) buyout of Chrysler is gaining ground on Wall Street, where analysts are revising their initial scepticism.

While Mr Kerkorian has still not outlined how America's second-biggest takeover would be financed, there is growing belief he would have little trouble raising the cash. Kenneth Blaschke, analyst at Dean Witter, said: "Our belief at this point is that the market doesn't fully recognise the likelihood that this transaction could occur. We believe the deal is do- able."

Mr Kerkorian's announcement that he was interested in a buyout met with a cool response on Wall Street. European motor manufacturers did not help sentiment when all the big players dismissed suggestions that one of them could join the bid in order to get a viable US manufacturing base.

But speculation persists that Lee Iacocca, the former Chrysler chairman who is a consultant to Mr Kerkorian, is negotiating with Volkswagen AG, Europe's largest car maker, about forming a company with a working title of Global Motors. When at Chrysler in 1990, Mr Iacocca held merger talks with Fiat.

On Sunday a spokesman for Mr Kerkorian said there was "a lot of interest" in the deal from potential finance houses and from "foreign entities" interested in a strategic alliance with Chrysler.

One of Chrysler's largest shareholders, an investment fund run by the New Yorker Seth Glickenhaus, said at the weekend that he would be a "grudging seller" at the buyout offer price of $55 a share.

The Chrysler share price, which opened on Wall Street at $48, is likely to languish below the offer price until Mr Kerkorian unveils a more detailed financial plan.

Some analysts have suggested Mr Kerkorian is simply seeking a higher exit price for his own 10 per cent stake in Chrysler. But few now doubt he could raise the funds if serious about a buyout.

Mr Kerkorian has proposed financing the buyout by using $5.5bn of Chrysler's own cash reserves, $3bn in new equity and up to $12bn in new debt. He also plans to contribute his own Chrysler stock, worth about $2bn.

Meanwhile, Chrysler has appointed Timothy Adams as president of Chrysler Europe. He replaces Darrell Davis, president of Chrysler Financial, and will be based at the European headquarters in Frankfurt.