Testimony in a trial over one of the biggest deals in automotive history ended on Wednesday with both sides claiming victory in a legal battle focusing on whether German motor industry head Juergen Schrempp lied about the true nature of the 1998 linkup between Daimler-Benz and Chrysler, Reuters reported.
The courtroom showdown, which began in December, was prompted by a fraud lawsuit brought by investor Kirk Kerkorian, a billionaire casino mogul who claims he was duped into believing the creation of DaimlerChrysler from Chrysler and Daimler-Benz was a merger rather than a takeover.
Reuters said that Kerkorian, Chrysler’s leading shareholder through his Tracinda Corp. investment company when it inked the $36 billion deal, contends that Schrempp – DaimlerChrysler’s chief executive – billed it as a “merger of equals” to lower the transaction price and avoid paying a so-called “control premium.”
Kerkorian’s suit was sparked by comments Schrempp made to The Financial Times newspaper in October 2000, when he said he always meant to make Chrysler a “division” of Stuttgart-based DaimlerChrysler.
Reuters reckoned that neither side appeared to score any major wins in the courtroom, in a trial that was muddled by semantics and halted by US District Court Judge Joseph Farnan over an evidence foul-up in mid-December.
But both reportedly claimed victory after the last witness stepped down from the stand late on Wednesday. Testimony had only resumed on Monday after the long recess.
“Testimony over the last several days has starkly illustrated what Kerkorian has been saying all along: Plain old-fashioned fraud took place when Daimler-Benz and Chrysler told the shareholders that the two companies had agreed to a ‘merger of equals,'” Terry Christensen, a lawyer for Kerkorian’s Tracinda investment company said in a statement cited by Reuters.
“By calling the transaction a ‘merger of equals,’ three things happened: Daimler saved $7-8 billion in the acquisition, Chrysler management got rich and Chrysler shareholders got cheated out of a control premium,” Christensen reportedly added.
But Reuters cited a statement from DaimlerChrysler which countered; “The case is completely without merit and we believe we have established that compellingly.
“Despite the presence of Tracinda’s designated representative within DaimlerChrysler’s board structure, Tracinda did not care what developed,” it said.
It was referring to the fact that Kerkorian had a representative on the board of Chrysler with access to insider information at the time of the deal.
“Tracinda was not harmed but in fact benefited enormously from the transaction,” the statement reportedly added, referring to the large increase in the value of Chrysler’s shares at the time of the merger.
According to Reuters, lead lawyers in case will have two or three months before they will be required to submit their post-trial briefings, or closing arguments, and no one is yet predicting when Farnan, who heard the case without a jury, will rule.
The news agency noted that the case, in which Kerkorian is seeking over $US1 billion in damages, is the only remaining lawsuit over the DaimlerChrysler deal after the company settled with a separate group of investors for $300 million in August.