Shares in troubled automaker DaimlerChrysler AG shot up early Wednesday on reports that it had hired a crisis team to defend it from potential hostile takeover bids.
The drop in the company's shares in recent months has made the company vulnerable to a takeover, and speculation about a buyout bid peaked since its No. 3 shareholder, billionaire Kirk Kerkorian, sold a third of his 3 percent stake.
Still, DaimlerChrysler declined Wednesday to comment on reports that they are drafting a defensive plan. The German news magazine Der Spiegel reported this week that the automaker is consulting with Deutsche Bank -- which is its largest shareholder -- and J.P. Morgan Chase to discuss how to defend the world's No. 4 automaker from takeover bids.
Shares rose 2 percent to 50.88 euros ($47.32) in early morning Frankfurt trading as some investors loaded up on shares in case a buyer emerged and offers a premium takeover price down the road.
At the current price, DaimlerChrysler has a market value of roughly 50 billion euros ($46.5 billion), less than the value of Stuttgart-based Daimler-Benz alone before it merged with Chrysler Corp. Without one of its largest shareholders to defend it, DaimlerChrysler is particularly vulnerable to a takeover.
"We are not worried. We don't see ourselves as a takeover candidate," DaimlerChrysler spokesman Thomas Froehlich said Wednesday.
But DaimlerChrysler spokesman Michael Pfister told The Detroit News that his company was talking with the investment banks about possible takeovers, adding "It's not that we expect something. It's only to be prepared."
The recent stock slide has convinced some analysts that DaimlerChrysler has reason to be wary.
"A buyout is possible, not just theoretical," said Juergen Pieper, an auto analyst with Metzler Bank in Frankfurt. "DaimlerChrysler is undervalued, and that makes it attractive for an acquiring company. It's an immediate good deal."
Possible buyers could include Ford Motor Co. and General Motors Corp., but most analysts point to Japan's Toyota Motor Corp. While Toyota ranks fourth behind the other two companies in revenues, it is the world's largest in terms of market value -- its $120 billion value dwarfing that of DaimlerChrysler.
Combined with a war chest of $20 billion in cash, Toyota could finance a deal through a mixed stock-and-cash transaction, Pieper speculated. A deal would give Toyota access to Mercedes, one of the worlds' top names in luxury autos, and deeper access to the U.S. and European markets.
Toyota spokesman Shigeru Hayakawa denied that Toyota was planning a bid for the German-American automaker.
Any offer would break new ground for Toyota, which has not made mergers a key thrust of its corporate strategy, said Saul Rubin, an analyst for UBS Warburg in New York.
Toyota has "always has been a go-it-alone company and hasn't been particularly interested in acquiring other companies," Rubin said, adding, "I just couldn't see that (takeover scenario) happening. I think it's very difficult to imagine that would occur."
Analysts speculated about other scenarios, including DaimlerChrysler selling off its U.S.-based Chrysler unit, a move being championed by disgruntled shareholders. But DaimlerChrysler Chairman Juergen Schrempp has repeatedly said the company won't dump Chrysler, even though it has racked up a $512 million loss in the third quarter and warning that losses could double that in the fourth.
The company could also buy back its own stock in an attempt to boost the stock price. The company is already authorized to buy up to 10 percent of its outstanding stock, or 100 million shares. That could also be one strategy DaimlerChrysler is discussing with its investment bank advisers.
"They've got to do whatever they can to push that share price back up," Pieper said. "That means possibly even taking on a bigger shareholder who could take up to a 5 percent stake."
DaimlerChrysler lost just that when Kerkorian sold off much of his stake. The move came less than two months after Kerkorian filed an $8 billion lawsuit against the automaker for allegedly defrauding investors about the merger, a suit that further weakened the troubled auto giant.
In the meantime, Deutsche Bank, is clinging to its 12 percent stake and is considered a safeguard against hostile bids. The Kuwait Investment Authority is DaimlerChrysler's No. 2 shareholder with a 7.4 percent holding.