Mitsubishi deal may close soon

DaimlerChrysler looking to buy one-third stake

March 23, 2000|By BLOOMBERG NEWS

STUTTGART, Germany -- DaimlerChrysler AG may buy a one-third stake in Mitsubishi Motors Corp., Japan's fourth-largest automaker, as soon as next month, people familiar with the situation said.

DaimlerChrysler, the world's fifth-largest automaker, wants greater access to Asia, which is expected to be the world's fastest-growing market this decade. Rivals General Motors Corp. and Ford Motor Co. have partners in the region.

"For DaimlerChrysler, MMC is pretty much the last partner available to improve its access to Asian markets," said Chris Richter, an analyst at HSBC Securities Japan Ltd. "What MMC gets is a reasonable shot at survival."

Analysts consider Mitsubishi Motors too small to stay independent. Japan's NHK television reported, without naming sources, that DaimlerChrysler will take a 33.4 percent stake through purchases of new shares and convertible bonds. At yesterday's closing price, the stake would be valued at $1.25 billion.

Mitsubishi Motors' board authorized President Katsuhiko Kawasoe to hold talks about selling a stake to a foreign carmaker. That move came a day after DaimlerChrysler Chief Executive Officer Juergen Schrempp said he expected to take steps "very soon" to expand the German company's presence in Asia.

A one-third stake would give DaimlerChrysler effective control of Mitsubishi Motors by granting it veto power over board decisions. Both companies declined to comment on whether a transaction is imminent.

DaimlerChrysler shares rose 0.85 euros to 68.90 in Frankfurt. Its U.S. shares rose 68.75 cents to $66.125. Mitsubishi Motors shares fell 5 yen to 410 in Tokyo.

The companies already cooperate. Mitsubishi Motors makes Chrysler Avenger and Sebring coupes at its U.S. assembly plant in Normal, Ill., and supplies engines for DaimlerChrysler's minivans.

Under the potential alliance, the companies would jointly produce small cars in Europe and share production plants in Europe and Asia, and Mitsubishi Motors would supply gasoline direct-injection engines to DaimlerChrysler, the Asahi newspaper reported.

"Mitsubishi would be a good partner for [DaimlerChrysler's] small-car strategy," said Juergen Pieper, an auto analyst at Bankhaus Metzler, who has a "hold" rating on the shares.

Mitsubishi Heavy Industries Ltd. is the largest single investor in Mitsubishi Motors, holding 248.6 million shares, or 27 percent of its stock, as of Sept. 30. Swedish truck maker Volvo AB holds a 5 percent stake. Mitsubishi Motors and Volvo agreed in October to take 5 percent stakes in each other and form the world's largest truck-manufacturing alliance. Some analysts say that may complicate any transaction, because Volvo competes with DaimlerChrysler, the maker of Freightliner and Sterling heavy trucks.

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