Fiat-UAW deal ends IPO distraction
Little change expected in Chrysler operations
Comments by Sergio Marchionne suggest Fiat may seek to list its stock on the New York Stock Exchange.
Photo credit: BLOOMBERG
DETROIT -- Fiat S.p.A.'s $4.35 billion deal to acquire the remaining 41.5 percent of Chrysler Group will allow the combined automaker's executives to concentrate fully on making and selling vehicles, analysts say.
Under the terms of the deal, announced New Year's Day, Fiat will pay $1.75 billion in cash to the UAW retiree health care trust, and Chrysler will pay $1.9 billion upfront and another $700 million over the next four years. In return, Fiat will control 100 percent of Chrysler stock, making Chrysler a wholly owned subsidiary of Fiat.
The stock purchase will change few, if any, operations at Chrysler. Fiat retains management control. Many functions already combined or coordinated -- such as purchasing, product planning and manufacturing methods -- will continue. The UAW presumably will lose its Chrysler board seat.
The transaction is expected to be made final on or about Jan. 20 and would eliminate the need for an initial public offering of Chrysler stock, which the health care trust had requested last year.
In total, Fiat will pay $6.3 billion to gain 100 percent control of Chrysler, less than the $7.4 billion that Cerberus Capital Management paid for 80 percent of Chrysler in 2007. Daimler AG and Chrysler combined in 1998 in a $36 billion so-called "merger of equals."
Chrysler-Fiat CEO Sergio Marchionne previously has said that Fiat may seek to relist its shares in the United States when the Italian automaker completed its acquisition of Chrysler.
The stock negotiations and IPO were "a distraction" that might have caused "some delays in expected launches for programs in the [2015 and 2016] time frame, but the deal is a good sign for the group to get back to the car business," said Jeff Schuster, senior vice president of LMC Automotive.
Marchionne's plan since he first obtained control of Chrysler in 2009 has been to use the two companies' design and purchasing power to make a single global automaker.
Stephanie Brinley, an analyst with IHS Automotive, said: "With this issue resolved, full management effort can be directed at implementing product and development plans."
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