After nine years failing to integrate the operations, German carmaker DaimlerChrysler AG (NYSE: DCX)said Monday that it agreed to hand over control of its struggling Chrysler Group unit to private-equity firm Cerberus Capital Management LP for $7.4 billion.
Cerberus will gain an 80.1 percent equity interest in the future company to be called Chrysler Holding LLC. In 1998, the German company Daimler-Benz merged with Chrysler in a deal worth $36 billion.
In 1998, Daimler-Benz merged with Chrysler for $36 billion.
The deal comes nearly three months after DaimlerChrysler announced that it was looking at â€œall optionsâ€ for the unit. The company also said at the time that it would be cutting about 13,000 jobs over the next several years to better compete. At the companyâ€™s latest shareholder meeting recently, investors pressured the companyâ€™s management to sell the unit.
We're confident that we've found the solution that will create the greatest overall value - both for Daimler and Chrysler,â€ said DaimlerChrysler Chairman Dieter Zetsche in a statement. â€œWith this transaction, we have created the right conditions for a new start for Chrysler and Daimler.
Under the terms of the deal, DaimlerChrysler will retain a 19.9 percent interest in the company. Cerberus will provide $5 billion for the companyâ€™s industrial business and $1.05 billion for the for the companyâ€™s financial services.
The deal also received support from the companyâ€™s car union, the United Auto Workers.