"Locust" over "Mercedes"

Daimler is facing hostile takeover

The German automaker Daimler is in a fever these days. As the German press writes, citing “informed sources,” a cloud of “locusts” is approaching the enterprise. So, with the light hand of local Social Democratic politician Franz Müntefering, foreign hedge funds began to be called in Germany. Allegedly, now these investors, whose activities, as is known, are not regulated at all, are approaching the holy of holies of the German national economy - the manufacturer of noble Mercedes cars. The Swedish fund Cevian Capital, as reported in the press yesterday, is allegedly already “buying up stakes” in Daimler.

It is known about the Scandinavian “locust”, in particular, that the company prefers to acquire blocks of up to 10% shares in enterprises whose assets are considered “undervalued”. For example, using a similar model, Cevian Capital invested in the automaker Volvo in its homeland, and later in the German company Muenchener Rueck, where it became the owner of a 3 percent stake. Cevian Capital has been following the German stock market with interest lately. The Munich-based Sueddeutsche Zeitung reported this week that “one of the candidates” among German companies for takeover by the Swedes could be the Daimler concern.

Local financial market analysts are not at all surprised by this scenario. The recent low price of Daimler shares is quite conducive to the emergence of new investors. And the recent dramatic events surrounding the takeover of one of the world's leading manufacturers of automobile tires - Continental - by the supplier of automotive components and assemblies Schaeffler once again confirms how fleeting these processes can occur.

Daimler is in full swing developing a strategy to counter a possible takeover. This was reported yesterday by the Financial Times Deutschland (FTD), published in Germany, citing “informed persons.” The Stuttgart automobile forge's main consultant in this matter, FTD has learned, is Deutsche Bank. At the same time, Daimler is developing various tactical steps. Thus, it is reported that Daimler management is busy searching for a strategic investor, the appearance of which should sharply weaken the interest in the concern from the “locusts”. The only real contender for such a role in the German concern seems to be the state of Kuwait. By the way, the emirate, which owns 7.6% of Daimler shares, is currently its only major shareholder.

The topic of hostile takeover has been discussed “very intensively” in recent days in the concern’s supervisory board, FTD points out. In these circumstances, representatives of the Daimler board claim that they have “good tentacles” in the market - obviously, largely thanks to long-term cooperation with Deutsche Bank. “However, the highest priority must now be given to repelling the attack of an uninvited shareholder,” the newspaper quotes an anonymous top manager at Daimler as saying.

Both Deutsche Bank and, of course, Daimler itself prefer not to disclose the details of their defensive plans. The Stuttgart automakers themselves (at least this is the official public position) do not consider their enterprise a potential target for a hostile takeover. Two weeks ago, presenting the company’s report for the last quarter, the head of the Daimler concern, Dieter Zitsche, said that he assessed the likelihood of this “not particularly high.” The statement was made against the backdrop of falling profitability, the indicators of which literally shocked the market.

One of the factors to counteract uninvited investors in the Daimler concern is also the purchase of its own shares. This process began at the enterprise in the spring of this year, and throughout the year, i.e. By April 2009, according to Mr. Zitsche's plans, Daimler, ahead of Kuwait, will become the owner of a 10 percent stake in its own securities.

Yuri Shpakov, Berlin