Kirk Kerkorian's mega-bid for the Chrysler Corporation appeared to stall yesterday following the revelation that the investment bankers Bear Stearns have walked away as his Wall Street advisers in the attempt.
Bear Stearns took the surprise decision after receiving a letter from Chrysler pressuring the bank not to assist in Mr Kerkorian's $22bn bid. The car maker has meanwhile embarked on a parallel campaign to dissuade the commercial banks from helping raise finance for the proposed takeover.
Though Bear Stearns had not formally been engaged by Tracinda, Mr Kerkorian's Las Vegas-based investment company, the bank had stated publicly that it had been selected to help shepherd the hostile bid. Its withdrawal leaves Tracinda without any Wall Street adviser.
"No one else as far as we know has stepped up to the plate," Joseph Philippi, a car industry analyst at Lehman Brothers, said. He also noted that Chrysler shares have been slipping in recent days as the credibility of Mr Kerkorian's $55-a-share offer has appeared to erode.
Other investment banks that have a track record with Mr Kerkorian include Merrill Lynch and Salomon Brothers. Analysts thought it unlikely that Merrill would want to get involved while Salomon is already helping Chrysler plot its defence.
Mr Kerkorian, who has teamed up for the bid with Lee Iacocca, the former Chrysler chairman, may face more serious difficulties, meanwhile, in raising financing, particularly with Chrysler arm-twisting the banks. His proposed takeover would require up to $12bn in new loans, together with $3bn from outside investors. The rest would come from Chrysler's own cash and from Mr Kerkorian and Mr Iacocca themselves.
Many big banks have relationships with Chrysler they would be loath to jeopardise by helping Mr Kerkorian. They include Chemical Bank, Chrysler's lead bank, JP Morgan and Chase Manhattan. One bank that conspicuously does not have ties with Chrysler is Citicorp.
And while Tracinda will now have to search for a new investment bank, Chrysler has lined up three of Wall Street's main players: Salomon, Morgan Stanley and, principally, CS First Boston.
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