Daimler lines up MTU asset sale, legal fight looms
FRANKFURT -- DaimlerChrysler pressed ahead on Friday with plans to auction off assets of heavy diesel motor unit MTU Friedrichshafen, but a legal battle with disgruntled minority shareholders hung over the deal.
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At issue is whether the world's fifth-biggest carmaker can use its 88 percent stake to remove the operating assets from MTU Friedrichshafen and sell them to the highest bidder over the opposition of MTU's founding families.
The Brandenstein-Zeppelin and Schmid-Maybach families, who own 12 percent of MTU Friedrichshafen and have veto rights over its divestment, would then be left with the ability to block only the sale of a hollowed-out holding company.
A DaimlerChrysler spokesman said the company had appealed against a preliminary injuction issued by a state court in Ravensburg that forebade selling the business as a whole because this was tantamount to circumventing the families' veto rights.
Complicating matters, the same court upheld Daimler's right to liquidate MTU under some circumstances, something that its statutes allow if shareholders vote 75 percent in favor. Daimler did so at a shareholders meeting on Thursday.
"We see good chances that we will emerge as winners from any legal conflict," the spokesman said.
"There will be a new sales process that will be open to many interested parties because we want to have competition," he added. He declined to say whether it would prefer to sell to an industrial or a financial buyer.
One source familiar with the deal said DaimlerChrysler may sell just part of MTU's assets in a transaction structured to fulfil the court's conditions. This goes against the wishes of staff, who want the business kept together.
DaimlerChrysler Chief Executive Juergen Schrempp said in July that several parties had expressed interest in the business, which he said was worth more than 1 billion euros.
The business employs nearly 6,700 staff and had 2004 sales of 1.35 billion euros ($1.7 billion).
The spokesman said DaimlerChrysler did not want to break up MTU but rather sell it "in one piece, if at all possible".
The families had reached an exclusivity agreement with private equity investor the Carlyle Group, frustrating DaimlerChrysler's efforts to sell it to an industrial partner such as Gemany's MAN, which broke off talks earlier this year.
German Chancellor Gerhard Schroeder has also appealed to the unit's owners to find an industrial buyer that he said could preserve jobs for the long term.
A MAN spokesman said the Munich-based group was still interested in MTU in principle but was just following events from the sidelines.
Family members said in a statement they expected to reach a constructive agreement with DaimlerChrysler "to limit the damage resulting from the liquidation".
