Frankfurt - DaimlerChrysler is expected to announce Friday that it will sell its Adtranz rail unit to Bombardier of Canada for slightly more than $1 billion, including debt, people familiar with the situation say.
The move completes the German-American company's transformation from a wide-ranging transportation conglomerate to a pure auto and truck maker.
As part of the agreement, Bombardier will assume roughly $237 million in financial liabilities. The final equity value of the deal will depend in part on the success that Adtranz has in selling some assets, people familiar with the situation say. The rail company is in the process of disposing of certain businesses; as part of its agreement with Bombardier, DaimlerChrysler will be able to participate in the upside realised from these sales, these people say.
In early 1999, DaimlerChrysler paid $472 million to ABB Asea Brown Boveri for the half of Adtranz that it did not already own, giving it full control of what was then an unprofitable operation. Since then DaimlerChrysler has been trying make the company more attractive, launching a cost-cutting operation last autumn that DaimlerChrysler believes will put Adtranz in the black this year.
Adtranz makes a variety of rolling stock that includes freight locomotives, high speed trains and light rail systems. Last year Adtranz reported revenue of e3,6 billion (R22,73 billion), up 7 percent from 1998.
The sale would appear to nearly complete a two-step process to refocus the company started by chairman Juergen Schrempp when he took over Daimler-Benz in 1995. Under the leadership of the previous chairman, Edzard Reuter, Daimler-Benz had expanded into a wide variety of technology and consumer fields from household appliances to aerospace.
But Schrempp, determined to cut costs and improve shareholder value, almost immediately set about reversing course, cutting off unprofitable businesses such as Dutch aircraft maker Fokker and electrical engineering company AEG. The idea then was for DaimlerBenz to become a broad transportation company, taking advantages of synergies in its aerospace unit, DASA, the rail operation and its auto and truck operations.
With the 1998 takeover of Chrysler, Schrempp has narrowed the company focus further still, spinning off DASA last year and shopping Adtranz around.
After the Adtranz sale only two main business areas remain outside the group's core auto and truck business N the financial services unit, which supports the auto business, and its MTU/Diesel Engine business, which makes large marine and rail engines.
Bombardier, a Montreal-based aerospace and transportation concern, operates about 15 railcar plants in Europe and an additional seven in North America.
Goldman, Sachs & Co. is representing DaimlerChrysler in the deal. - Dow Jones