KK Vs DCX The Beat Goes On

PHILADELPHIA, May 14, 2004; Jon Hurdle writing for Reuters reported that - DaimlerChrysler on Friday issued its latest rejection of a claim by billionaire investor Kirk Kerkorian that it had fraudulently called the 1998 combination of the two automakers a merger of equals rather than a takeover.

In court papers, DaimlerChrysler's lawyers repudiated arguments by Kerkorian's attorneys that he had been deprived of a so-called "takeover premium" that would have been paid if the German architects of the deal to create the world's fifth-largest automaker had been honest about the nature of the transaction.

Kerkorian's investment company, Tracinda, the largest Chrysler shareholder at the time of the merger, is seeking $1.35 billion plus interest in compensation and whatever punitive damages, costs and fees are deemed appropriate.

"No change in shareholder control occurred in the merger and Tracinda is not entitled to a control premium," DaimlerChrysler attorneys stated in their response to earlier papers filed by Kerkorian's lawyers after a trial that began in December last year and ended in February.

Trial proceedings in the case ended in February in U.S. District Court in Delaware, but Kerkorian's lawyers summed up his arguments, and a litany of securities law and common law fraud claims, in an 86-page briefing paper filed with the court in April. They asked the court to enter a judgment against the defendants.

In their own response, Tracinda's attorneys say they are arguing for compensation because the defendants "intentionally made material false statements" and not on the basis of whether the company underwent a change of control in the merger.

"Defendants blatantly mischaracterize Tracinda's claims and then use those fictional claims to argue that Tracinda cannot establish damages," the Kerkorian lawyers' statement said.

Kerkorian's suit was prompted by a Financial Times interview in October 2000 in which DaimlerChrysler Chairman Juergen Schrempp said the deal had been pitched as a "merger of equals" but that he always intended to make the No. 3 U.S. carmaker "a division" of the German partner.

In Friday's filing, DaimlerChrysler also argued that Tracinda had failed to prove that the merger had been misrepresented in conversations between Kerkorian and former Chrysler Chairman Bob Eaton. The two men agreed it was a good deal, the DaimlerChrysler statement said.

U.S. District Court Judge Joseph Farnan, who heard the merger trial in Delaware without a jury, is expected to rule in coming months.