updated 4/15/2005 9:41:53 AM ET 2005-04-15T13:41:53

DaimlerChrysler's leading shareholders have been repeatedly approached in recent months by private equity firms seeking a buy-out and break-up of the car maker.

A senior investment banker close to the situation said Deutsche Bank, the German-U.S. car maker's leading investor with a stake of 10.4 per cent, had been approached "a number of times in the past 12 months".

Other leading shareholders, including the Kuwait Investment Authority, which owns 7.2 per cent, are also understood to have received offers.

The approaches were made both directly by private equity firms and investment banks acting on their behalf, bankers said.

Deutsche Bank and the KIA declined to comment.

However, they are understood to have rejected the offers because they undervalue the stakes. The position of Jürgen Schrempp, the Daimler chief executive, has long been bolstered by large strategic shareholders, who have helped rebuff strong criticism from fund managers over the faltering performance of the group, the world's fourth-largest car maker.

Analysts are convinced that although Deutsche is a self-proclaimed seller of its stake, political reasons would prevent it from dealing with a buyer that had a stated strategy of breaking up the group.

The bank has been a core Daimler shareholder for decades and although it has been gradually reducing its stake most recently selling 1 per cent last summer it remains closely linked to the car maker.

Hilmar Kopper, formerly Deutsche's chief executive, is Daimler's supervisory board chairman.

The approaches come against a background of growing interest in Germany's big companies by foreign investors, particularly private equity groups and hedge funds.

Last year, Blackstone took chemicals group Celanese private in a €3 billion ($3.8 billion) deal, while KKR has invested €8.5 billion in Germany in the last five years.

Fortress a fund specializing in real estate investment did last year's biggest merger and acquisition deal in Germany, the €3.5 billion purchase of Gagfah, the residential property group. Bankers believe now that the big funds, and KKR and Blackstone in particular, could well raise their sights to target blue-chip companies listed in the Dax30 index.

Some say as many as 10 groups in the index could be targets.

But the ambition to buy the whole of Daimler which has a market capitalization of €32 billion goes far beyond the scale of blue-chip buy-outs that bankers have traditionally believed were possible. Linde and MAN, the industrial conglomerates, and Tui, the travel group, are all worth less than €7 billion.

Deutsche Bank has said in the past that it would sell its Daimler stake only at €38 a share or more, compared with the current price of €32.

Daimler declined to comment.

Copyright The Financial Times Ltd. All rights reserved.


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