Fiat raises stake in Chrysler
By Ian Simpson |
April 22, 2011, Friday
|
Print Edition
Print Edition
FIAT SpA will pay US$1.27 billion for an additional 16 percent stake in auto maker Chrysler this quarter, raising its stake to 46 percent in a deal that was faster and cheaper than expected.
The purchase takes Fiat a big step closer to its target of owning 51 percent of the Detroit auto maker, control that Chief Executive Sergio Marchionne defined on Wednesday as "happiness" for Italy's largest industrial group.
Fiat, Europe's No. 6 auto maker by market share, said yesterday it had reached agreement with Chrysler and its other shareholders to exercise an option to buy the 16 percent stake in the second quarter.
The option would be exercised when Chrysler's US$7 billion debt with the United States and Canadian governments is repaid, it said.
Fiat already owns 30 percent of the No. 3 US auto maker and expects to add another 5 percent by the end of this year as it reaches a performance goal, it said.
Three sources familiar with the issue said last week Fiat was looking to pay around US$1.5 billion for the stake and the deal would be closed in coming months.
Securing majority control is key for Fiat's plans for a Chrysler's initial public offering. The listing had been planned for the second half of 2011 but could be pushed into 2012, a possibility Marchionne raised in late March.
"They're moving faster than expected as they want to consolidate their (financial) statements before the IPO," said an auto analyst who declined to be named. "The option price seems absolutely fair as the consensus on the value of Chrysler is around US$8 billion."
He said Fiat would reap a 30 percent capital gain if Chrysler's value reached, as expected, US$10 billion or US$11 billion after its listing.
Marchionne, who has made Fiat one of Europe's top turnaround stories, sees Chrysler as crucial to elevating the Italian firm to a global player.
The purchase takes Fiat a big step closer to its target of owning 51 percent of the Detroit auto maker, control that Chief Executive Sergio Marchionne defined on Wednesday as "happiness" for Italy's largest industrial group.
Fiat, Europe's No. 6 auto maker by market share, said yesterday it had reached agreement with Chrysler and its other shareholders to exercise an option to buy the 16 percent stake in the second quarter.
The option would be exercised when Chrysler's US$7 billion debt with the United States and Canadian governments is repaid, it said.
Fiat already owns 30 percent of the No. 3 US auto maker and expects to add another 5 percent by the end of this year as it reaches a performance goal, it said.
Three sources familiar with the issue said last week Fiat was looking to pay around US$1.5 billion for the stake and the deal would be closed in coming months.
Securing majority control is key for Fiat's plans for a Chrysler's initial public offering. The listing had been planned for the second half of 2011 but could be pushed into 2012, a possibility Marchionne raised in late March.
"They're moving faster than expected as they want to consolidate their (financial) statements before the IPO," said an auto analyst who declined to be named. "The option price seems absolutely fair as the consensus on the value of Chrysler is around US$8 billion."
He said Fiat would reap a 30 percent capital gain if Chrysler's value reached, as expected, US$10 billion or US$11 billion after its listing.
Marchionne, who has made Fiat one of Europe's top turnaround stories, sees Chrysler as crucial to elevating the Italian firm to a global player.
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