EU approves Cerberus purchase of Chrysler

U.S. buyout firm Cerberus Capital Management won approval from the European Commission today to buy the Chrysler group DaimlerChrysler.

The deal was approved under a special simplified procedure because neither customers nor competitors had lodged any objections, the Commission said.

DaimlerChrysler agreed in May to sell most of its stake in the money-losing Chrysler group and its related financial services business to Cerberus.

The deal, which is expected to close in the third quarter, still needs approval from the U.S. authorities.

It marks the first time a Detroit 3 automaker will be run by a private equity company, and requires Cerberus to contribute more than $6 billion to shore up the balance sheet of the struggling automaker and its finance arm.

Daimler agreed to kick in $1.55 billion, or 1.15 billion euros, to Chrysler in order to exit a 9-year-old merger that had failed to deliver on its promise to create a global automotive powerhouse.

Daimler-Benz's $36 billion merger with Chrysler in 1998 aimed to marry mass-market brands like Jeep with luxury brands like Mercedes-Benz.

Under the terms of the new deal, Cerberus Capital Management gets an 80.1 percent stake in Chrysler and its related financial services business.

Of Cerberus' $7.4 billion commitment, $6.05 billion will be put into Chrysler -- $5 billion into auto operations and $1.05 billion into its finance arm.

Cerberus will pay $1.35 billion to Daimler, which in turn is loaning $405 million to Chrysler.

The German company -- whose name will change to Daimler AG if shareholders approve -- will contribute $880 million to cover long-term liabilities at Chrysler.