Tuesday, August 5, 2008

Daimler and the locusts

Share prices of the German auto company Daimler have risen more than 4% in recent days, apparently on the strength of rumors that an unspecified hedge fund is building up a position in the company.

The magazine, Focus, citing a supervisory board member, said that it has confirmed the rumors that Daimler is "in the sight of the foreign hedge fund."

A spokeswoman for the company, responding to the magazine story yesterday, said the company has no indication that any hedge fund is interested.

The rumors seem to have gotten more specific since that statement. This morning, the newspaper Sueddeutsche Zeitung is reporting that the Swedish investment fund Cevian Capitalis buying up shares.

The meaning of the labels can be slippery, especially since the laws vary from one country to another, but Cevian seems from the description on its website to be more of a private equity fund than a hedge fund. Still, if it is buying a large chunk of Daimler, it probably wants to shake things up. That website refers to its strategy of "active ownership."

The terminological distinction is important because German politicians have taken to denouncing foreign hedge funds as "locusts." Maybe a foreign (but European) PE fund seems less threatening.

At a maximum (and I'm engaging in nothing more than blue-skies speculation here folks) this sort of news can put a company "in play" as an acquisition target. I doubt Cevian would want to acquire such a "big fish" outright, but there are other companies in the world that would want Daimler.

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