Tuesday, May 15, 2007

Monday-morning quarterbacking of the Chrysler buyout by other people

Yesterday Dealbreaker's Bess Levin conclusively proved that satire is dead, by pointing out that Daimler essentially paid Cerberus Capital to take Chrysler off of their hands:

Dealbreaker: Daimler's $650 Million Bar Tab

But it’s Deal Journal that actually tells us something interesting: by “sale of $7.4 billion,” Daimler actually means “it’s going to cost us $650 million” to get rid its red-headed step-child.
As the release itself explains:
Cerberus is contributing $5 billion into the new company (this does not go to Daimler). And another $1.05 billion goes into the financial business (this, again, does not go to Daimler.) Daimler gets $1.35 billion (but will loan the new company $400 million.)
So Daimler makes about $1 billion then, right? Actually, no.
Like a politician obliquely saying “mistakes were made,” Daimler goes on to say that the restructuring “will give rise to a cash outflow” of $1.6 billion.
In sum, the net outflow will be about $650 million, plus another $878 million of “prepayment compensation”, Daimler says. And that’s how a $7.4 billion windfall actually turns into a bill.

As expected, Long or Short Capital has published their analysis of the Chrysler deal, and have drawn some sobering conclusions.

Long or Short Capital.com: Better Ways to Spend $7.4 billion than buying Chrysler

  • Donating $1,000 in malt liquor money to each member of the US homeless population

  • Making Spiderman 3 24.67 times

  • Drowning a stripper by making it rain with $7.4 billion in singles. Sacagawea singles.

  • Buying decaying shark corpse art for all your closest friends. Your 1,000 closest friends assuming you get a discount for buying decaying shark corpses in bulk (we have little information on the dynamics of the decaying shark art market).

  • Purchasing Manchester United, Arsenal, AC Milan, Real Madrid, the New York Yankees, the Boston Red Sox, the LA Dodgers, the Chicago Cubs and the New York Mets with enough cash to probably buy half the NHL.

  • Lifetime bottle service

  • 1.75 billion golf balls to prep for that management consulting interview question

  • A money bonfire

Since they were willing to go all-in on Chrysler, I'm sure that if you could outline a plausible-sounding exit into an IPO for the money bonfire, Cerberus Capital would be all ears.

Now it's my turn:

Predictably, the Canadian media's angle all fell along similar lines: "Cerberus outbids Magna for Chrysler", despite the Canadian auto-parts company being a day late, and $2 billion short, the collective dissapointment amongst navel-gazing Canuck journalists was palpable. It's a tragedy, I know, that a Canadian company ends up being a spear-carrier on the world stage instead of a major player again. Perhaps the combination of smug self-centeredness, combined with a much smaller pool of capital explains in part why Canada has so few companies that are global brands.

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1 comment:

Flatland Pastor said...


All that and the potential of having a CEO named Belinda.