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Business

DaimlerChrysler Settles Merger Suit for $300 million

On Friday, DaimlerChrysler agreed to pay $300 million to disgruntled former Chrysler investors to settle a lawsuit linked to the 1998 merger. The investors claimed they were misled into approving the deal.

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DaimlerChrysler decided to cut its losses.

Although it is among the largest settlements in a shareholder class action, DaimlerChrysler in the end decided $300 million (€275 million) was a more attractive sum then $22 billion (€20 billion), the amount disgruntled investors were seeking in the suit that claimed the world’s fifth largest automaker had duped them into approving the merger of Germany’s Daimler-Benz and Chrysler in the United States.

“Although DaimlerChrysler believes the class action is completely without merit, the company has agreed to a settlement, since a local jury could have reached a different conclusion,” the company said in a statement.

The suits were filed after Jürgen Schrempp, DaimlerChrysler’s CEO, told the Financial Times that he had always meant to relegate Chrysler to a division of the group. The investors, prompted by a suit already filed by billionaire Kirk Kerkorian, sued themselves, claiming the deal had been presented as a merger of equals, rather than a takeover, to keep the price down.

Kerkorian’s Tracinda Corp. once owned 14 percent of Chrysler’s stock. This settlement has no bearing on Kerkorian’s suit, which DaimlerChrysler has vowed to continue to fight.

The final settlement is still subject to final agreement and to court approval. The carmaker said $220 million of the settlement would be covered by insurers.

“That was very cheap for DaimlerChrysler. If the small shareholders get so little, Kerkorian should get nothing because he was an insider,” Rolf Woller, an analyst with HVB, told Reuters.

Still, Kerkorian’s lawyer, Terry Christensen, said the settlement was a positive development and said he is seeking compensatory damages for his client in the range of $1.5 to $2 billion. “You don’t pay $300 million because it’s a nuisance,” he said. “You pay it because you’re very concerned.”