NEW YORK - Chrysler shares shot higher last week as Wall Street generally applauded the proposed Daimler-Chrysler merger. But the deal left some analysts wishing for more: more cost-cutting, more sharing and more details.
'It is a good deal, but it is not the best combination imaginable,' said Scott Merlis, an independent analyst with his own firm, Merlis Automotive International Inc. in Westport, Conn.
Chrysler shares zoomed when the companies confirmed the merger talks, jumping more than 7 points to $48.81 on Wednesday, May 6. The price surged again on Thursday, May 7, to $53.50. That compares with a 52-week low of $30.88.
The co-chairmen of the proposed new company, Robert Eaton of Chrysler Corp. and Juergen Schrempp of Daimler-Benz AG, stressed in a conference call for analysts and investors there will be no layoffs as a result of the merger.
That plays well on Main Street but less well on Wall Street, which generally rewards cost-cutting, even if it means cutting the work force.
LIMITS COST SAVINGS
Schrempp said the merged com-pany expects to save about
$1.4 billion in 1999, its first full year of operation, mostly based on material cost savings. Over the next three years or so, the benefits should reach at least $3 billion a year.
After the conference call, Merlis said that, compared to other potential combinations, there is too little redundancy between Chrysler and Daimler. That limits the opportunities for cost savings, he said.
'The best combination imaginable would be a European company and a Japanese company, which could reduce some of this worldwide overcapacity we're suffering with, one that would share plants, share platforms, share showrooms, and shave 10 percent off of purchasing,' he said.
Chrysler shareholders will own 43 percent of the new DaimlerChrysler AG. But the ultimate value of the deal is a moving target, depending on Daimler's share price on a date still to be fixed.
And the size of the premium paid to Chrysler shareholders varies with the Chrysler share price on that date.
Based on Daimler's closing price on May 7, Chrysler shareholders would get about $37.6 billion worth of stock in the deal, the equivalent of about $58 a share. That compared with Chrysler's May 7 closing price of $53.50.
Eaton said he wants to close the deal by early October.
'PRETTY GOOD DEAL'
'At the present time, it's a pretty good deal, but it's not brilliant,' said Seth Glickenhaus, a Chrysler institutional investor. He said Glickenhaus & Co. in New York represents a block of about 8 million Chrysler shares.
'At $50, I'm neutral,' said Glickenhaus.
'At $55, that's pretty good. At $60, that's a fair deal. Below $50, I start getting not very interested in whether the deal goes through or not.'