DaimlerChrysler wins fraud trial

Was it really a 'merger of equals'?

US-German carmaker DaimlerChrysler has won a court case which accused it of lying to shareholders during the 1998 merger which created the group.

The suit said it had falsely described the deal as a merger rather than a takeover, a more expensive proposition.

Casino tycoon Kirk Kerkorian, at the time Chrysler's biggest shareholder, wanted $1.2bn (£640m) in compensation.

But a US court ruled he and his company, Tracinda, had failed to prove their accusation of fraud.

The $36bn deal, Judge Joseph Farnan ruled, had been a "merger of equals".

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Mr Kerkorian had brought the case in 2000 after an interview in the Financial Times with Juergen Schrempp, DaimlerChrysler's chief executive.

Juergen Schrempp's comments were the catalyst for the case

Mr Schrempp told the paper that the German firm had always meant to make Chrysler a "division" of DaimlerChrysler.

That, Mr Kerkorian alleged, proved the company was going for a takeover rather than an equal partnership.

Absorbing Chrysler rather than merging with it would have proved more expensive, since shareholders would have demanded a bigger premium, he said.

'Fraud'

But the judge thought otherwise.

"The court concludes that Tracinda has failed to prove its claims of common law fraud," he wrote in a 124-page ruling.

DaimlerChrysler welcomed the decision, saying it would continue to "concentrate... on making this merger a great success".

"We have always maintained there is no merit to this case," a spokesman said.

The firm has yet to show the efficiency gains and cost cuts promised as part of the deal, and its most recent figures showed a healthy performance at Chrysler making up for weakness at Mercedes.

A lawyer for Tracinda and Mr Kerkorian said the case sent a message that was "unfortunate for all shareholders", although he noted DaimlerChrysler had settled a class-action suit by other investors in 2003 for $300m.