Fiat eyes remaining Chrysler stake, mulls public stock offer
Fiat now owns 58.5 per cent of Chrysler, and wants to buy the remaining 41.5 per cent from a health care trust fund for union retirees.
DETROIT—Italian automaker Fiat is considering a public stock offering after the company buys all of Chrysler, according to a person briefed on the matter.
The plan to sell shares of a combined company is among several options being evaluated by Sergio Marchionne, who serves as CEO of both automakers, said the person, who requested anonymity because no decision has been made.
A stock offering would raise much-needed money for research on new vehicles at both companies, and could help Fiat weather the economic downturn in Europe.
Fiat now owns 58.5 per cent of Chrysler, and wants to buy the remaining 41.5 per cent from a health care trust fund for union retirees. The two sides differ on price, and that may be decided by a U.S. court.
Fiat and Marchionne were appointed to manage Chrysler in 2009 by the U.S. government, which had bailed out the struggling company and funded its trip through bankruptcy restructuring. Since then, Fiat has raised its stake in a resurgent Chrysler, and Marchionne wants to merge the companies to generate more cost savings from joint research, management and purchasing.
Fiat SpA shares are now traded publicly on the Milan stock exchange, while Chrysler is technically a private company with no publicly traded shares. Presumably, Fiat shareholders would be offered a stake in the new company if they approve the merger.
No decision has been made on where to list shares of the new company, the person said. But Marchionne has repeatedly told reporters that U.S. stock markets are more profitable than those in Italy.
Marchionne has said Fiat has 10 billion euros ($13 billion) in cash that can be used to cope with a severe slowdown in European auto sales and buy the trust fund’s stake in Chrysler.
Merging the companies would give Fiat access to Chrysler’s cash holdings. Currently, Fiat shares in Chrysler’s profits but can’t use the Detroit automaker’s funds for its own operations. Without Chrysler, Fiat would have lost $1.41 billion last year. Chrysler had $11.6 billion in cash at the end of 2012. Both Chrysler and Fiat are scheduled to report first-quarter earnings on Monday.
Marchionne has already taken steps to combine Fiat and Chrysler. The companies are sharing engines and parts and have jointly designed cars like the Dodge Dart compact. The balance sheets are already combined, although there is a strict separation of assets.