How to Chrysler make a value by case Chrysler vs Tracinda

Chrysler takes strategy

·         Trace 5 years

·         Cash to stock compensation

·         Remove lawsuit for Iacocca, pay him $21 million

Chrysler’s board adopted golden parachutes for 30 highest-ranking officers. Golden parachutes are lucrative benefits given to top executives in the event that a company is taken over by another firm, resulting in the loss of their job. Benefits include items such as stock options, bonuses, severance pay, etc. A golden parachute is an agreement between a company and an employee specifying that the employee will receive certain significant benefits if employment is terminated. Sometimes, certain conditions, typically a change in company ownership, must be met, but often the cause of termination is unspecified. These benefits may include severance pay, cash bonuses, stock options, or other benefits.

York stated that Tracinda Corporation was considering a proxy fight. He criticized Chrysler’s management for holding to much cash, stating that $4.5 billion would be an ample reserve rather than $7,5 billion. He also stated that $2.5 billion of Chrysler assets were “ non-core ”. A proxy fight is a strategy typically used during a hostile takeover. A proxy fight occurs when the acquiring company tries to persuade shareholders to use their proxy votes to install new management, which the acquiring company hopes will be more open and receptive to the takeover. If the shareholders agree to the proxy fight, they'll attempt to gather enough proxies to win a corporate vote.

A proxy fight is a way for the acquiring company to more easily takeover its target by forcing the board to accept the deal's terms through the use of proxies. A proxy fight may also be called a proxy contest. Though common, a takeover need not be the catalyst for a proxy fight. A proxy fight may also occur when a group of shareholders opposes the company's management and/or position on particularly significant matters. After Tracinda consider for proxy fight. Chrysler began a publicity campaign against York’s criticism and called attention to Chrysler’s earnings and product successes.

Chrysler creates the value with:

·         Better Management of Chrysler cause Chrysler would increase the account-ability of its board by switching from cash to stock compensation.

·         Chrysler announced strong fourth quarter earnings.

·         Solve the problem with Iacocca, Chrysler would pay Iacocca $21 million in May 1995

·         Chrysler dividend increase 20% in July 1995, its fifth dividend increase in 2 years and dividend increase 17% too in May 1996 and 2-for-1stock split. The stock closes up $2.25 to $ 67.125, compared with its price in low 40s in May 1995, about 1year earlier.

·         Chrysler can run from take over.

M&A assignment

*miraout*