20-F Annotated: DaimlerChrysler AG 2006
The merger between Daimler-Benz AG and Chrysler Corporation in 1998 that created DaimlerChrysler AG (Deutsche Börse, NYSE: DCX) has spawned several legal proceedings (Rechtliche Verfahren), both in Germany and the US, of which some are still ongoing. The latest annual report (Geschäftsbericht, in German, or here in English; SEC Form 20-F filing) details three such proceedings (report from p.194 (210 of 237); form from p.95). One is a securities class action in Germany, the other two are in the US, a direct action and a securities class action.
The two class actions are discussed in this previous post; DaimlerChrysler has appealed the German decision, plaintiffs the US one (see here for the January 2006 opinion and order of the US action).
The direct action, containing allegations similar to the class action’s, was filed by Tracinda Corporation in 2000. Result so far: “On April 7, 2005, the United States District Court for the District of Delaware rendered a judgment in favor of the defendants and against Tracinda Corporation on all claims finding that there had been no fraud and no violation of U.S. securities laws. Tracinda appealed the decision to the United States Court of Appeals for the Third Circuit in January 2006, which heard oral arguments in September 2006. Its decision is pending.” (form p.98)
That was then. Now that the post-merger (or is that ‘post-takeover’) entity has stated that “all options” are open regarding Chrysler however, in what could be seen as or possibly have the effect of a reversal of the merger, it was only appropriate more legal action would follow.
Two shareholders, Prof Dr Ekkehard Wenger and Dr Leonhard Knoll, have succeeded in extending the agenda of the company’s AGM (Hauptversammlung) with several motions, one of which, if approved, will require an audit of the valuation of Chrysler and the conversion ratio used in the merger. (Also see the Wall Street Journal (subscription required)).
The extension was published in the German Federal Gazette (Bundesanzeiger (Antrag 18, p.4), in German, with thanks to Hans-Martin Buhlmann of German proxy agent Vereinigung Institutionelle Privatanleger eV, or here in English (Motion 18, p.8).
Wenger and Knoll base their motion on statements made by the Stuttgart District Court in its August 2006 decision, which DaimlerChrysler has appealed against (as noted above): “[T]he District Court… arrived at the conclusion that there had been a serious misevaluation by the partners in the business combination [and so we find] there should be an investigation to determine whether those responsible can be called to account.”
DaimlerChrysler’s response to that and the other motions: “There are no grounds for the special audits requested. Some of the motions relate to ongoing proceedings and official investigations that are not expected to produce any findings beyond the findings already established through those current proceedings… [A] special audit cannot be expected to provide any additional benefit.” (p.8/p.15)
Details of the AGM, to be held on 4 April in Berlin, can be found here (in German, or here in English). (Subscribe to WV&Z here.)