May 21, 2009 6:00 PM

Daimler Taps Hughes Hubbard for Tesla Motors Stake

Posted by Brian Baxter

In this economy, we guess it helps to form alliances.

German auto giant Daimler AG announced earlier this week that it would acquire a 10 percent equity stake in San Carlos, Calif.-based electric vehicle designer and manufacturer Tesla Motors.

The strategic partnership will help Daimler in its effort to develop emissions-free vehicles in light of stricter fuel economy standards in the U.S. proposed by the Obama administration.

Stuttgart-based Daimler turned to Hughes Hubbard & Reed on the deal. The firm's relationship with Daimler extends to a previous relationship with Chrysler Financial dating back more than a decade, says lead M&A partner Kenneth Lefkowitz.

Hughes Hubbard began representing DaimlerChrysler Financial Services after Daimler bought Chrysler in 1998. The client eventually became Daimler Financial Services when Chrysler was sold off to Cerberus Capital Management in 2007.

Given Chrysler's current state, Lefkowitz considers himself lucky that his firm stuck by the Germans. (Click here for an interesting story on Germany's car culture.)

"Fortunately our people went with the Daimler side," Lefkowitz says. "And while we've done work for the U.S. businesses, this is the first deal we've done for Daimler AG."

Lefkowitz says that client confidentiality prevents him from discussing more detailed aspects of the Tesla deal.

M&A partner Avner Ben-Gera, patents practice cochair Peter Sullivan, new media and technology chair Daniel Schnapp, tax partner Andrew Braiterman, employee benefits partner Spencer "Jerry" Harrison, labor and employment partner Rita Haeusler, IP partner Perla Kuhn, environmental law partner Susan Campbell, counsels Wayne Josel and Ross Lipman, and associates Michael Traube, Eric DeCecchis, and Hali Resnick rounded out the Hughes Hubbard transaction team.

Tesla was advised by Silicon Valley stalwart Wilson Sonsini Goodrich & Rosati. Name partner and firm chairman Larry Sonsini, M&A partners Mark Baudler and David Segre, and IP partner Selwyn Goldberg served as lead outside counsel to Tesla. Sonsini sits on Tesla's board of directors.

Tesla is planning to use Daimler's investment to make more affordable fuel-efficient cars.

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