Could Daimler suffer a hostile takeover?

Now that Daimler is on its own and no longer suffering the financial setback of the loss-making Chrysler brand, the luxury German carmaker will be very tempting as a possible takeover target in the eyes of cash-rich private equity investors. Until recently, most takeovers in the auto industry were between other carmakers, but now, for the first time, a major carmaker will be run by a private equity firm.

Cerberus, the firm that bought Chrysler, made its fortune during the ‘90s by purchasing underperforming companies. As for profitable firms with strong share prices, owners may end up offloading stock to gain their own returns. Carmakers in the future will have to keep an eye on profitability levels or else they too could become takeover targets, a situation Daimler could easily face.

German newspaper Der Spiegel reports that Daimler CEO Dieter Zetsche has assured analysts that a risk of a takeover has declined over recent years and that execs have better control over the fate of the company.

Just six months ago, there were fears that a ‘locust’ firm would attempt a takeover of DaimlerChrysler, whose combined value had dropped below €50 billion. By selling off Chrysler, Zetsche emulated the move that an attacking investor would undertake and in the process reduced the threat.

Daimler AG is not completely out of the woods. The firm is overvalued at its current €65 billion market cap and is sitting on cash reserves in excess of €12 billion, making it very attractive to investors. Execs are worried and are trying to persuade their current largest investor, Kuwait, which owns a 7.1% stake, to increase its holdings.