FRANKFURT/DETROIT (Reuters) – U.S. private equity firm Cerberus has demanded billions of dollars in compensation from Daimler (DAIGn.DE) as part of a deal to buy the remaining 19.9 percent stake in Chrysler, Daimler said on Wednesday.
The demand — for more than the $7.2 billion Cerberus invested for an 80.1 percent stake in the number three U.S. carmaker last year — has snarled but not scuppered talks to sell Daimler’s remaining stake in Chrysler, it added.
“The negotiations…have been made considerably more difficult during the last weeks due to exaggerated demands by Cerberus,” the German carmaker said in a statement.
It said Cerberus’s claims went beyond contractually agreed commitments, alleged that Daimler did not run Chrysler properly between signing and closing the deal, and that Daimler had provided incomplete information about the business.
“Daimler rejects these absurd allegations and the claims derived therefrom as being completely without substance.”
A Daimler spokesman said talks could still go forward.
“In our view the negotiations with Cerberus have neither failed nor ended,” he said, but made clear Daimler was not prepared to give away its remaining Chrysler stake.
“We had not expected that Cerberus would expect to get the stake for free,” he said.
A spokesman for Cerberus was not immediately available for comment.
Daimler shares briefly fell on the news before recovering to trade up 3.2 percent at 24.98 euros by 1556 GMT, lagging a 6.1 percent gain in the DJ Stoxx European car sector index .
Cerberus has sent Daimler a letter claiming that Chrysler was mismanaged from February 2007, when Daimler announced that it was selling the automaker, until August of that year, when the deal went through, a person with direct knowledge of the situation said.
Cerberus has not filed a lawsuit against Daimler but has demanded that the German automaker pay out more than the $7.2 billion that Cerberus originally paid for its controlling stake in Chrysler, the person said.
The extraordinary demand comes at a time when all three Detroit-based automakers are running short of cash and pressing the U.S. government for a $25 billion financial rescue package.
Until now, Cerberus executives had said that the Chrysler investment performed according to their plans until the most recent industry-wide downturn in U.S. auto sales.
Cerberus has been seeking a range of partners for Chrysler and had been in merger talks with General Motors Corp (GM.N), but those discussions broke off earlier this month when GM said it had determined that its urgent priority was to focus on shoring up its own cash position.
(Reporting by Maria Sheahan in Frankfurt, Hendrik Sackmann in Stuttgart and Kevin Krolicki in Detroit; editing by Simon Jessop)