An attorney representing billionaire investor Kirk Kerkorian is "very encouraged" by DaimlerChrysler AG's decision on Friday, Aug. 22, to pay disgruntled shareholders $300 million.
The shareholders, four institutional investors, sued in U.S District Court for the District of Delaware in 2000. They argued that Daimler-Benz AG's 1998 acquisition of the Chrysler Corp. was a takeover, not a merger as the company contends. As such, Chrysler shareholders were entitled to additional payment, the plaintiffs argued.
Kerkorian is suing DaimlerChrysler on the same grounds. His suit is scheduled to go to trial on Dec. 1.
The settlement "is basically an admission by DaimlerChrysler that these claims create a lot of exposure for their company," said Terry Christensen, attorney for Kerkorian's Tracinda Corp.
The $300 million settlement will be awarded to the four institutional investors who sued and to anyone holding Chrysler shares at the time of the consolidation, pending court approval, said Jay Eisenhofer, attorney for the plaintiffs. The settlement did not include a per-share award, Eisenhofer said.
"Daimler misrepresented what the plans were for the company at the time of the transaction," Eisenhofer said. "Had they told the truth, they would have had to pay additional money for the company."
DaimlerChrysler said in a prepared statement on Friday, Aug. 22, that the "class action is completely without merit" but "the company has agreed to a settlement since a local jury could have reached a different conclusion."
The four institutional investors are the Florida State Board of Administration, the Denver Employees' Retirement Plan, the Policeman's Annuity and Benefit Fund of Chicago and the Municipal Employees' Annuity and Benefit Fund of Chicago.
Court approval of the $300 million settlement is expected within 60 to 90 days, Eisenhofer said.
DaimlerChrysler said it will seek reimbursement of approximately $220 million from applicable insurance policies. The company's supervisory board approved the settlement.
The higher-profile Kerkorian case will be tried in December in federal court in Wilmington, Del.
The claims by the institutional investors settling with DaimlerChrysler "were basically pulled from our original complaint," said Tracinda attorney Christensen.
Last week, DaimlerChrysler said it will continue to contest the separate case brought by Tracinda Corp.
Tracinda is a Los Angeles investment firm wholly owned by Kerkorian, one of Chrysler Corp.'s largest shareholders at the time of the merger.