DaimlerChrysler to Pay $300M in Shareholder Pact

August 22, 2003 (PLANSPONSOR.com) - German carmaker DaimlerChrysler AG has agreed to the $300-million settlement of a US class-action lawsuit filed by former Chrysler investors including pension funds over Daimler-Benz's 1998 Chrysler takeover.

The plaintiffs sued the world’s fifth biggest carmaker over allegations that the deal was billed as a merger of equals, rather than a takeover, in order to keep the price down, Reuters reported. The suits were filed after DaimlerChrysler Chief Executive Juergen Schrempp told the Financial Times that he had always meant to relegate Chrysler to a division of the group.

Plaintiff lawyer Jay Eisenhofer said among his clients was a group of large public pension funds, including the Florida state employee pension fund, as well as the municipal pension funds of Denver and Chicago.

In a statement Friday, the automaker denied any wrongdoing. “Although DaimlerChrysler believes that the class action is completely without merit, the company has agreed to a settlement, since a local jury could have reached a different conclusion,” the company asserted. “The decision to resolve this litigation was approved by the company’s supervisory board and enables the company to continue concentrating its resources on its business agenda.”

The company said the plaintiffs had been asking for $22 billion in the case pending at the US District Court in Delaware.  DaimlerChrysler said it would seek $220 million from its insurers for the settlement payment.  

In a separate case, DaimlerChrysler said the Delaware settlement did not affect the suit filed by Kirk Kerkorian’s investment company Tracinda and that it would continue to contest that suit.  “DaimlerChrysler believes all claims against it relating to the 1998 merger, including those in the Tracinda case, are without merit and the company remains committed to a vigorous defense of this case,” it said.

A US judge struck down part of DaimlerChrysler’s argument for the dismissal of the $8-billion Tracinda claim in June, saying investors could not have suspected the so-called merger of equals was a takeover.