Daimler Chrysler is selling its heavy motor unit MTU Friedrichshafen to Swedish buyout firm EQT, the world's fifth-biggest carmaker said on December 28 .
DaimlerChrysler gave no precise purchase price, but said it and EQT had agreed on an enterprise value of 1.6 billion euros ($1.9 billion).
"In consideration of cash, cash equivalents, debts and pensions, DaimlerChrysler will benefit from a cash inflow of an estimated 1.0 billion euros," Daimler said in a statement.
Daimler said it expected the sale to boost operating profit by 0.4 billion euros and net profit by 0.3 billion euros, once the deal had obtained regulatory approval, which is expected in the first quarter of 2006.
The divestment is seen as a key part of Daimler's plans to finance planned job reductions via voluntary redundancies - costing 950 million euros - at its Mercedes Car Group division in Germany, where it wants to cut up to 8,500 jobs. Daimler Chrysler shares had risen 0.4 percent to 42.95 euros by 0815 GMT, outpacing a 0.1 percent gain in the DJ Stoxx European car sector index.
Kohlberg Kravis Roberts and Dubai International Capital had been the early front runners to buy the business for about 1.7 billion euros. German truckmaker MAN was also a finalist in the sales process and was the favourite of MTU staff who feared a financial buyer would break up MTU.
"As the prices under discussion with the three bidders were very similar, we decided in favour of the bidder with the most convincing concept," Ruediger Grube, a member of Daimler's board of management and supervisory board chairman of MTU, said in a statement.
MTU makes engines for ships, locomotives, power plants, heavy vehicles and tanks. It had sales of 1.35 billion euros in 2004. The group of businesses being sold includes heavy diesel engine business MTU Friedrichshafen as well as Detroit Diesel's off-highway unit. The deal must be reviewed by the German Economics Ministry and competition authorities.
The head of EQT's German business, Marcus Brennecke, said there were currently no plans for job cuts or plant closures and said he expected regulators to approve the deal without concessions. Gulf-based Dubai International Capital early this year took a stake of around 2 percent in DaimlerChrysler.