Fiat clears Chrysler merger hurdle
MILAN (Bloomberg) -- Fiat will spend less than the limit the carmaker set to buy shares from investors who opted to sell ahead of its merger with Chrysler Group, clearing a key hurdle before the deal can close.
Based on a preliminary tally, the total will not exceed the 500 million euros ($658 million) Fiat allotted, the company said today in a statement. Had the amount exceeded the company's cap, the deal would have been delayed.
"I am delighted with these results," Fiat Chairman John Elkann said in the statement. "We are now looking forward to the completion of this project."
Fiat-Chrysler CEO Sergio Marchionne said: "I am reassured by the fact that the vast majority of our equity holders have remained loyal and committed shareholders.
Marchionne said investor support is "of crucial importance as we embark on the execution phase, which will dramatically improve the market positioning of our group."
Marchionne said previously that if a critical mass of investors were to breach the cap, he would start the merger process again -- effectively meaning a delay of several months.
Fiat shareholders have the right under Italian law to sell their shares because Fiat is moving its registered offices away from Italy.
Fiat said it was finishing a count of shares for which cash exit rights had been validly exercised, but it could already say that the 500 million euro limit would not be exceeded, based on data calculated so far. The company said it would give final details by Sept. 4.
"Fiat has determined that even if all remaining unmatched notices and unmatched confirmations were to be matched, the maximum number of shares for which cash exit rights have been validly exercised will yield an aggregate exposure that is below the cap," it said.
Download the Fiat press release as PDF, above left.
Fiat said the merger is on track to close by the middle of October as planned.
After shareholders approved the merger on Aug. 1, investors opposing the plan were allowed to the sell their stock to Fiat at 7.727 euros per share. The company's stock rose as much as 3.5 percent, then fell to 7.43 euros at the close of trading, down 1 cent.
Earlier this month, the shares fell to their lowest level in 2014 on concerns that too many investors would demand cash, which would have forced Fiat to delay the combination until a new shareholder meeting takes place. The stock has traded below Fiat's withdrawal price ever since the deal was approved.
Arndt Ellinghorst, head of automotive research at ISI Group, said it seemed that Fiat shareholders have chosen not to exercise their cash exit rights in sufficient numbers to prevent the merger from proceeding. "With the cash exit price at €7.727 euros, it would seem that shareholders believe their Fiat holding could and should be worth more at some point in the future," he said in an emailed note to investors.
Fiat is combining with Chrysler to create what the company estimates is the world’s seventh-largest automaker as it seeks to better compete with heavyweights including General Motors Co., Volkswagen Group and Toyota Motor Corp. The new entity, Fiat Chrysler Automobiles NV, be registered in the Netherlands with its head office in London and its main stock listing in New York.
Reuters contributed to this reportContact Automotive News