Daimler Mans The Barricades
Fears of takeover, foreign or otherwise, figure large in the minds of many European auto execs. These fears ostensibly caused the Porsche-VW shotgun marriage collegial partnership. Schaeffler's "sneak-up" takeover of Continental is fuelling a whole new round of paranoia. Daimler's market value has declined by 45 percent on the year; the weakness has placed the Stuttgart firm in the middle of the takeover mania. Reports emerged saying "a foreign hedge fund is buying a large number of shares in (Daimler)," followed swiftly by more rumors that Swedish hedge fund Cevian Capital was taking a position in the firm. Daimler now says that it has "no indication" that it is under assault. But that confidence is undermined by reports from Automotive News [sub] that Daimler has enlisted Deutsche Bank to watch its back. Deutsche Bank is reportedly helping Daimler find an "anchor investor" who could play white knight should a takeover materialize. Hedge funds, like most predatory creatures, tend to not give a lot of warning in advance of a takeover, so its hard to blame Daimler for freaking out over this one. Especially considering that the prime suspect, Cevian Capital, "does not see itself as a hedge fund but as an investor that pushes for changes in companies." Yikes!
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Damn, I'm gonna lose sleep tonight wondering what will happen to Dumbler if they are taken over by someone else - NOT! At least if it's a hedge fund they won't get rid of all the good designers, engineers, and middle managers and project leaders that really make the cars. And they won't tell them they have to design and build cars their way, and use the cheapest materials possible, and old generation suspension pieces (and charge them a huge markup for it). But you never know! The good part will be seeing Dr. Z's early retirement.
Not gonna happen. The rules in Germany are different. Besides: 1. Daimler made $6bn last year. 2. Daimler owns lots of different assets. They haven't had years of selling off the good stuff like the Americans. They could drop the 22% of Airbus that they own, the McLaren group, Freightliner, the Misubishi Fuso trucks operation...the Tognum defense operations...not to mention the very valuable 7% of Tata motors and the worthless 19.9% of ChryCo. I figure they could raise $15 billion plus from this, with the most valuable part being the big Airbus share. 3. Daimler is worth $90bn. That is about 15x the worth of GM.If you wanted to buy it, you would have to put down at least $15bn, and find someone to borrow the rest from. Which would be especially hard as no bank in Germany would be in the lending arrangement. Plus, you would probably have to pay a little more for the deal. 4. My conclusion: The hedge fund wants Daimler to dump non-core items like aerospace and defense and use the cash to buy stock,
Ask Schaeffler Group if the "German DAX" rules are worth the paper they are printed on... Daimler is in serious waters and knows it. $6B is peanuts. That's one quarter of Continental's sales. And Daimler is only worth it's current share price x outstanding shares. They can't buy enough of their own shares to make enough of a difference and they know it, hence the call for help.