EQT wins bid for DaimlerChrysler subsidiaries

The Northern European private equity firm will acquire German engine manufacturer MTU Friedrichshafen and portions of Detroit Diesel in a €1.6 billion deal.

Swedish private equity firm EQT Equity has announced the signing of an agreement to acquire 100 percent of MTU Friedrichshafen GmbH, a German engine manufacturer, from automaker DaimlerChrysler.

The acquisition will be made through EQT’s Northern Europe-focused EQT IV fund, which was launched in 2004 with €2.5 billion of committed capital.

According to the agreement, EQT, whose bid beat out those of US buyout firm Kohlberg Kravis Roberts and marine engine manufacturer MAN B&W, will acquire MTU Friedrichshafen as well as parts of DaimlerChrysler’s Detroit Diesel Corporation subsidiary through a deal valued at €1.6 billion ($1.9 billion). DaimlerChrysler will receive a cash inflow of approximately €1 billion through the sale of these units.

“With the sale to EQT, we are putting MTU Friedrichshafen on the right track for continued expansion,” said Dr. Rüdiger Grube, a member of DaimlerChrysler’s Board of Management for Corporate Development, according to a company press release. “As the prices under discussion with the three bidders were very similar, we decided in favour of the bidder with the most convincing concept.”

The transaction is expected to close in the first quarter of 2006, pending regulatory approval.

The sale of MTU Friedrichshafen and Detroit Diesel by DaimlerChrysler follows on the heels of a number of other recent divestments by the German car manufacturer. In 2003, the automotive manufacturer sold its MTU Aero Engines business to KKR for €1.45 billion. Then in late 2004, the company sold its venture portfolio, DaimlerChrysler Venture, to secondaries investor Cipio Partners for an undisclosed amount. Last month, DaimlerChrysler sold its 12.42 percent stake in Japanese auto manufacturer Mitsubishi to Goldman Sachs and earlier this month, it agreed to sell its American LaFrance emergency vehicles unit to the New York- and Charlotte, North Caroline-based distressed specialist Patriarch Partners.

Established in 1994, EQT manages six private equity funds with combined capital commitments of €6 billion. The firm’s earlier funds targeted companies based in the Nordic region, while the most recent two have a broader, North European scope. EQT IV is the firm’s only equity fund that is not yet fully invested.