Daimler to drop defense against unwanted investors

April 06, 1993|By Bloomberg Business News

FRANKFURT -- For decades, Germany's industrial giant Daimler-Benz AG has been virtually impregnable to unwanted investors. Those days are now over.

Daimler-Benz has decided to open its shareholder roll, both through a stock listing in the United States and by scrapping the Mercedes AG Holding, its main defense against unwanted predators.

"The globalization of our markets and our company have forced our hand in both these measures," a Daimler-Benz spokesman said. "If we want to live up to the claim of calling ourselves a global player, we can no longer restrict ourselves to focus on the German investor alone."

Analysts generally agree that, in the longer run, both announcements -- the U.S. listing and the merger of Mercedes Holding -- will strengthen the Daimler stock and make it more attractive for investors.

"Foreign investors always eyed the defensive construction of Mercedes Holding with great suspicion", says Adrian Brundrett, stock analyst at Bank in Liechtenstein, or BiL. "With scrapping this anti-takeover dinosaur, Daimler is taking a big and long overdue step to open up to international investors."

Mercedes AG Holding was founded in 1975 "with the goal to preventshare purchases, which could undermine the corporate independence of Daimler-Benz AG." Only about one-third of Daimler's 46 million shares are currently held by investors who aren't directly linked to Daimler.

Deutsche Bank controls 28.37 percent of Daimler's equity, and the emirate of Kuwait 14 percent. An additional 25.23 percent is parked safely with Mercedes Holding.

The shareholder structure of Mercedes Holding, however, is completely lost in a maze of sub-holdings with obscure names such as Stern Automobil-Beteiligungsgesellschaft mbH as well as Komet, Stella, and Star all with the rather long, but meaningless addendum Automobil-Beteiligungsgesellschaft mbH.

Stella, Star, Stern, Komet mean just about the same thing: star (in various languages), symbolizing the stylized star that adorns every Mercedes automobile.

Imbedded in the ownership structure, German banks and insurance companies are shareholders of these various "star holding" companies.

"This obscure defensive construction through the Mercedes Holding is a complete dinosaur", says Hans-Peter Wodniok, share analyst at James Capel in Frankfurt. "[It is] designed to deter any serious investor, at least those who would eye a Daimler stake as a strategic shareholding rather than just as a share investment for the quick gain."

The death of Mercedes Holding, though long expected, was not only cheered. News that Daimler-Benz plans to merge Mercedes AG Holding into the group by the end of this year, offering Mercedes Holding shareholders a one-for-one swap into Daimler shares, caught the stock market completely unawares.

"The timing was grotesque," said one of the official stockbrokers at the Frankfurt stock exchange. "The official announcement hit the market two hours after the close of the official session, and on a Friday, when even the greater part of the after-bourse market players had already wound down business for the weekend. Pending an important announcement such as that, both Daimler and Mercedes shares should have been suspended."

Many -- investors and brokers alike -- were badly burned, because they missed the merger news on Friday and found a completely different price scenario yesterday. The lucky few that were still there to act on the news on Friday afternoon jumped at the chance to swap out of Daimler stock into Mercedes Holding to cash in a quick gain on the arbitrage.

Yesterday, Daimler fell 2.5 percent on high turnover of 250,000 shares on interbank trading system IBIS alone, while Mercedes Holding leapt 17 percent

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