Detroit, MI, United States (4E) – In an attempt to resolve its dispute with a United Auto Workers’ retiree trust over the value of shares, Chrysler Group LLC may be forced to launch an initial public offering (IPO).
The Voluntary Employee Beneficiary Association (VEBA), a trust that owns a 41.5 per cent stake in the company, has the right to request the company to stage IPO proceedings. This clause is part of the deal signed by the Auburn Hills, Mich.-based car maker that brought it out of bankruptcy protection. VEBA requested Chrysler to register 16.6 per cent of its shares public.
The decision comes following a court battle between Fiat and retirees’ union over value of Chrysler shares the trust holds. The trust claimed that its shares are more than twice the amount Fiat was willing to offer them last year.
In July, Fiat exercised its first-call option that will purchase from VEBA a 3.3 per cent stake in the car maker. When VEBA refused to offer the shares, Fiat filed a lawsuit in a U.S. court, which is currently pending. Fiat, earlier this month, moved in to buy the second tranche of shares from the trust, potentially increasing its stake with the company to around 65 per cent.
Chrysler CEO Sergio Marchionne is apprehensive of any move to take the company public, and would prefer directly buying the shares from the trust and use the money to repay bondholders.