Investors circle Chrysler

Blue Light special in aisle 4-Chrysler Group!

Investors circle Chrysler
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The bidding process for the Chrysler Group will begin as soon as next week,
when private investors and automakers are expected to receive confidential
data on the U.S. division of DaimlerChrysler AG.

Distribution of the detailed prospectus is the first step in a lengthy
process that could lead to the sale of Chrysler to a private-equity firm or
a rival automaker such as General Motors Corp.

Only a limited number of potential buyers will be given the document
prepared by J.P. Morgan Chase & Co., the investment banker hired by
DaimlerChrysler to manage a possible sale.

"We are not going to let every single company in the world in here," said
one person close to Chrysler. "Serious companies are going to get a peek
under the tent."

People familiar with the situation said a handful of blue-chip,
private-equity firms are already slated to receive the document, including
Cerberus Capital, Apollo Management, the Carlyle Group and the Blackstone
Group.

In addition, GM and several foreign auto companies will also likely get the
prospectus that breaks down Chrysler's assets, liabilities and future
product plans and sales projections.

A sale or spin-off of Chrysler is among the options under active
consideration by its German parent, DaimlerChrysler.

The stunning decision to put Chrysler on the block came Feb. 14, the same
day that a sweeping restructuring was announced for the troubled U.S. unit.

Potential bidders surface

Since then, several potential bidders have surfaced in the private
investment community, according to people close to Chrysler.

One auto analyst said Friday that firms such as Cerberus and Apollo may view
Chrysler as an attractive turnaround candidate that could be sold off or
broken up down the road.

"The private-equity firms are funds that have a defined investment horizon
of five to seven years," said John Casesa of the Casesa Shapiro Group. "Any
investment they make, they need to liquidate it and return the capital to
investors."

If Chrysler were acquired by a private-equity firm, the buyer would likely
own it for a period of time and then take it public with a stock offering.

A second option would be to sell a revived Chrysler to another automaker, or
break up its brands and operations for sale individually.

While private-equity firms have huge war chests to spend on distressed
companies, Chrysler's problems could make it a tough sell.

The former No. 3 U.S. automaker lost $1.5 billion last year and won't be
profitable until 2008 at the earliest. Chrysler's truck-heavy lineup is also
under increasing pressure in a market tending toward more fuel-efficient
cars and crossover vehicles.

"Chrysler will not be a typical candidate for private-equity acquisition
because it's very cyclical and capital intensive," Casesa said. "I think it
could be viewed as a risky investment."

To soften the risk, a private-equity buyer could team up with an established
automaker to purchase Chrysler.

A private investor would provide capital, while the automotive partner would
join with Chrysler on vehicle platforms and manufacturing. Chrysler's
minivan and Jeep SUV architectures would be valuable to competitors such as
GM.

GM, DCX are in talks

GM has been in high-level talks with DaimlerChrysler for at least two months
about acquiring Chrysler, people close to the companies have told The
Detroit News. GM has also explored sharing vehicle platforms for SUVs and
small cars with Chrysler.

Industry insiders have speculated whether GM could link up with Cerberus,
for example, to take on Chrysler.

Last year, Cerberus bought a 51 percent interest in General Motors
Acceptance Corp., GM's highly profitable finance arm. Cerberus also is a
lead player in a bid to buy the bankrupt Delphi Corp., GM's largest parts
supplier.

GM has declined to comment on Chrysler. Other automakers -- including
Volkswagen AG, the Renault-Nissan alliance and Hyundai Motor Co. -- have
denied any interest in bidding for the Auburn Hills-based automaker.

But that could change once the prospectus is issued. People close to
Chrysler said they expect other automakers to at least examine the document
and size up a once-in-a-decade opportunity to buy a major competitor.

The process will be tightly controlled, with interested parties required to
sign nondisclosure agreements before receiving the prospectus. Overall, the
number of bidders will be limited based on size, experience and credibility.

"It's not an auction in the American sense of the word," said one person
familiar with the process.

Chrysler team in place

A team of Chrysler executives and specialists has already been formed to
field inquiries from potential buyers. Typically, a private-equity firm
reviews a prospectus, and then digs deeper into various aspects of the
document.

Sources close to DaimlerChrysler said Chief Executive Dieter Zetsche hopes
to offer a progress report on Chrysler at the German automaker's annual
meeting on April 4 in Stuttgart.

DaimlerChrysler shareholders are pushing hard for a swift resolution. Since
Feb. 14, the reaction among shareholders has been near-euphoric to the idea
that the nine-year marriage of Daimler-Benz AG and Chrysler Corp. will be
dissolved.

However, sources in the investment community said a negotiated purchase of
Chrysler will take several months, particularly if a bidding war erupts
among interested buyers.

The critical issue will be what price DaimlerChrysler expects for an
enormous organization with more than 80,000 employees and annual revenues of
$62 billion.

Several industry analysts have put Chrysler's value between $5 billion to $7
billion, but estimate its health care liabilities for workers at about $18
billion.

One potential investor told The News that the amount of debt and the size of
the health care bill attached to Chrysler will have a significant impact on
the potential price of a deal.

News that DaimlerChrysler is expected to put out its prospectus soon boosted
the company's share price again Friday. DaimlerChrysler stock closed at
$70.92, up 94 cents, in trading on the New York Stock Exchange.