Merger roadblock for Fiat and Chrysler hurdled

Jose Castro – Fourth Estate Cooperative Contributor

New York, NY, United States (4E) – In an announcement, Fiat SpA had determined that very few shareholders had tendered their stock to prevent the reorganization of the Italian car giant and Chrysler into what would be known as Fiat Chrysler Automobiles. The tax residency of the new company would be in the United Kingdom, the legal headquarters would be in Amsterdam and its stock market listing would be in the United States, specifically New York.

Earlier this month, a shareholders’ meeting had conducted a vote to approve the reorganization but those opposing the motion were allowed to tender their share to Fiat. This would effectively put the reorganization plan in jeopardy should the number of tendered shares prove to be the majority.

Should the merger push through, this would be the greatest accomplishment for Fiat and Chrysler CEO Sergio Marchionne. He took over Chrysler ten years ago and resuscitated the company from bankruptcy through the takeover of Chrysler by Fiat.

According to the preliminary tally, the total shares tendered were no more than EUR500 million or USD658 million which Fiat had allotted. This is a requirement under Italian law, to allow sharesholders cash exit rights. The cap set by Fiat is EUR500 million. If the amount tendered was greater than the cap set by the company, then the merger would be delayed. The final results would be announced by September 4, 2014 by introducing Fiat Chrysler Automotive to the public.

In a statement, Fiat Chairman John Elkann, “I am delighted with these results. We are now looking forward to the completion of this project.” This was soon followed by the chief architect of the merger CEO Sergio Marchionne, “I am reassured by the fact that the vast majority of our equity holders have remained loyal and committed shareholders. Investor support is of crucial importance as we embark on the execution phase, which will dramatically improve the market positioning of our group.”

The project is the merger of Fiat with Chrysler to become, according to several estimates, the seventh largest automaker in the world. The combined strength of the two companies would allow it to complete with industry behemoths such as General Motors Co., Volkswagen AG as well as Toyota Motor Corp.

In a statement, Fiat said, “Fiat has determined 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 added, “The period for any creditor opposition to be submitted will expire on October 4, 2014.” The merger is projected to be completed by mid-October. Under the terms of the merger, the dissenting investors would be allowed to sell their shares at EUR7.727 per share to the company.

The growth strategy of the auto maker is based on the growth of the Chrysler Jeep brand as well as the Fiat Alfa Romeo line. The forecast for the vehicle sales would increase to 7 million by 2018 from 4.4 million in 2014.

Article © AHN – All Rights Reserved
About the Author

Leave a Reply