MUNICH -- Analysts today said Daimler's move to raise billions of euros in fresh capital shows how badly European automakers need cash in the current weak economic climate.
Daimler said on Sunday it will raise 1.95 billion euros ($2.67 billion) through the sale of a 9.1 percent stake to Abu Dhabi's Aabar Investments PJSC.
Some 96.4 million new shares will be issued to Aabar for a price of 20.27 euros each through a 10 percent capital increase that excludes subscription rights for existing shareholders.
The dilution means the Emirate of Kuwait's stake in Daimler will shrink to 6.9 percent from a previous 7.6 percent, and Aabar would eclipse it as Daimler's largest investor.
Max Warburton, of Bernstein Research, said the move suggests Daimler needs capital more urgently than widely realized.
Daimler's net cash of 3.1 billion euros and gross cash of 5.6 billion euros at the end of 2008 was inferior to German peers BMW and Volkswagen, Warburton said in a note to investors.
Adam Jonas, of Morgan Stanley, said he expects other European automakers to follow Daimler's move unless the economic climate improves sharply and soon.
"We believe this is a timely move ahead of what is likely to be a very difficult trading environment," Jonas said in a note to investors.
"We estimate the company will burn more than 18 million euros of cash per day in 2009, which means the capital increase would absorb not much more than 100 days of cash burn," Jonas said.
Jonas said Morgan Stanley expects European automakers as a group to burn 104 million euros per day in 2009, equating to nearly 60 percent of the sector's market capitalization over the course of the year.
Electric car cooperation
Daimler CEO Dieter Zetsche said Aabar will work together to pursue joint strategic initiatives.
Daimler and Aabar plan to cooperate three different areas: electric vehicles that would reduce carbon emissions, developing innovative compound materials to be used in automotive manufacturing, and social projects in Abu Dhabi to educate young talent for positions in the car industry.
Daimler has repeatedly been a subject of takeover speculation in the past since it is one of the only major carmakers in the world without a protective shareholder.
Some analysts therefore have believed the massive crisis in the auto industry might encourage Daimler to boost its size via an acquisition or a cross-shareholding with another rival such as BMW.
Formerly called Aabar Petroleum Investments Company PJSC, Abu Dhabi-based Aabar was founded in early 2005 to explore oil and gas in Southeast Asia.
Aabar has since branched out into real estate and financial services, recently buying AIG Private Bank for 407 million Swiss francs ($363.7 million) in equity and debt and taking a 3.3 percent stake in Italian toll road operator Atlantia, formerly known as Autostrade.
A fraction the size of Daimler, Aabar has total assets of some $922 million and a market cap of just 1.58 billion dirhams.
Aabar is controlled by the Abu Dhabi state-owned International Petroleum Investment Company (IPIC).
"Daimler is an iconic brand and a financially strong company with a reputation for excellence worldwide," Aabar Chairman and IPIC managing director Khadem Al Qubaisi said in a statement. "We are delighted to have received the opportunity to be making this investment."