Chrysler, Kerkorian end battle with truce Ally of shareholder will sit on board

February 09, 1996|By BLOOMBERG BUSINESS NEWS

HIGHLAND PARK, Mich. -- Chrysler Corp. ended its long battle with dissident shareholder Kirk Kerkorian by agreeing yesterday to put a Kerkorian ally on the board and to step up its stock repurchase program.

In return, the 78-year-old Las Vegas billionaire agreed not to raise his stake in the company for at least five years.

Chrysler also formally adopted an "anti-greenmail" policy banning the payment of a premium for shares held by hostile holders in an effort to silence them.

Mr. Kerkorian's critics, including Chrysler executives at times, have contended that his intent all along was to have Chrysler buy him out so he could pocket a big profit.

Mr. Kerkorian is Chrysler's second-largest shareholder, with 13.6 percent of its shares. Since 1990, when he began accumulating his 51.9 million Chrysler shares, they have tripled in price to a current value of about $30 billion.

The agreement was hailed by both sides in a sudden show of harmony that ended one of the bitterest corporate dramas in recent years.

"This agreement creates substantial economic benefits for all Chrysler shareholders," Mr. Kerkorian said. "We are pleased that now have the framework for a constructive relationship."

Chrysler Chairman and Chief Executive Robert Eaton, who has criticized Mr. Kerkorian for being more concerned with short-term gain, today called him "a long-term and important investor."

As part of the agreement, Chrysler and former chairman-turned-opponent Lee Iacocca dropped lawsuits against each other over Mr. Iacocca's right to exercise his Chrysler stock options. Chrysler rejected Mr. Kerkorian's request raise the level at which the company's "poison pill" defense is activated.

Chrysler agreed to add as a director James D. Aljian, a long-time executive of Mr. Kerkorian's Tracinda Corp. and a director of MGM Grand, which is controlled by Mr. Kerkorian. Mr. Kerkorian had proposed to elect his chief strategist, Jerome York, to the board.

Mr. Kerkorian, who led a failed takeover attempt in April and has criticized the automaker for not taking steps to boost its share price, got some key things he wanted: Chrysler said it will double its stock buyback plan this year to $2 billion and buy another $1 billion of its shares next year.

But Chrysler retained its right to maintain a cash fund of at least $7.5 billion, an amount that Mr. Kerkorian deemed excessive.

issue in the dispute with Mr. Iacocca was Chrysler's move to block his right to exercise stock options valued at about $40 million. Under the agreement, Mr. Iacocca won't be able to exercise the options, but will get $32 million from Mr. Kerkorian and $21 million from Chrysler.

Mr. Iacocca also agreed not to associate with Mr. Kerkorian's business for five years.

Chrysler's stock trading was halted after the announcement.

It last traded at $56.75, down $1.625.

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