Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 13, 1995 TAG: 9504130076
SECTION: NATL/INTL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: DETROIT LENGTH: Medium
``We don't want to put Chrysler at risk,'' Chairman Robert Eaton said in a statement after the directors met to consider an unsolicited proposal of $55 a share from Iacocca and Kerkorian, the company's largest shareholder.
``We've worked hard to build this company's financial strength, to increase shareholder value and to build the confidence of customers. We have no desire to reverse the process.''
The stock offer - 40 percent above Chrysler's Tuesday closing stock price - is the biggest and most daring takeover gambit to come along since the 1980s heyday of hostile corporate raiding.
Alex Yemenidjian, an executive at Kerkorian's Tracinda Corp. in Las Vegas, rejected the idea that the offer was hostile.
``It certainly is not hostile to the shareholders, who own the company and who are going to make a bundle of money,'' Yemenidjian said.
Chrysler finished 1994 with a record $3.7 billion profit and a cash surplus of $7.5 billion its managers say they need to weather the industry's next downturn.
Kerkorian contends that cushion is too big and the company's stock is priced too low. He pushed Chrysler's board in December to increase the stock dividend and buy back shares to push up the price.
Under the proposal, Kerkorian would put up $2 billion of his own money. He already owns 10 percent of Chrysler.
About $50 million would come from Iacocca, who retired as chairman in 1992 after becoming a corporate icon by bringing Chrysler back from bankruptcy's brink. Other investors, still to be recruited, would add $3 billion more.
An additional $5.5 billion would come from Chrysler's cash surplus and the rest from bank loans and bonds, Yemenidjian said.
In rejecting the offer, Chrysler noted that no financing had been lined up and the deal would deplete the company's cash reservoir by more than 70 percent.
``I want to make absolutely clear that Chrysler management is in no way involved with Tracinda's proposal,'' Eaton said. ``I told Mr. Kerkorian that last night when he informed me by telephone of his intention to make an announcement.''
Meanwhile, 28 lawsuits were filed in Delaware, where the corporation is registered, seeking to block Chrysler from accepting the buyout offer. The suits were by shareholders who claimed the company would be breaching its financial responsibility unless it got a price higher than the $55 a share offered by Kerkorian.
The proposal sent Chrysler shares shooting up in heavy New York Stock Exchange trading, $9.50 higher at $48.75, though they ended well below the takeover price.
That reflected plenty of skepticism about whether such an audacious attempt could succeed and what the prospective buyers plan for the company.
Some automotive industry analysts thought the bid was sincere and if Chrysler's directors reject it, Chrysler would be ``in play,'' attracting other potential buyers.
Kerkorian wants Chrysler managers, including Eaton, to stay on and have a stake in the company.
The offer reflects Chrysler's status as the most profitable car maker and the acknowledged U.S. leader in lean operating and car and truck design.
Iacocca, 70, said in a statement that he's not interested in managing Chrysler again. He would act as an adviser to Kerkorian and the company.
by CNB