What Marchionne Wants, Marchionne Gets — Sometimes

Wall Street Journal - May 24, 2013

Chrysler/Fiat CEO Ser­gio Mar­chionne, who is known for get­ting his way even if that means bruis­ing rivals, has made it clear that he seeks to make a deal to own all of Chrysler Group LLC.

Get the details as ana­lysts won­der if Mar­chionne can make it hap­pen.

The chief exec­u­tive of Chrysler Group LLC and major­i­ty own­er Fiat SpA aims to have the Ital­ian com­pa­ny buy full con­trol of the U.S. auto mak­er and pub­licly sell shares on a U.S. stock exchange, a maneu­ver like­ly to include a com­pli­cat­ed chain reac­tion that could mean more than $20 bil­lion in deals.

That is almost as big as the $23 bil­lion ini­tial pub­lic offer­ing by Gen­er­al Motors Co. in 2010. The stock sale deliv­ered a $260 mil­lion pay­day to banks that worked on the deal. Mr. Marchionne’s ambi­tions are caus­ing the biggest U.S. and Euro­pean banks to cir­cle.

Mr. Mar­chionne has been work­ing on two ele­ments of his plan for months. One is a bid to raise new financ­ing for Fiat to give the com­pa­ny a finan­cial cush­ion as it works through the pieces of his over­all strat­e­gy.

The sec­ond piece: acquir­ing the 41.5% stake in Chrysler now held by a trust fund that pro­vides health care for Chrysler’s retired work­ers. That deal is bogged down in court.

Last year, Fiat exer­cised an option to buy a 3.3% stake from the trust fund, known as a vol­un­tary employ­ee ben­e­fi­cia­ry asso­ci­a­tion, or VEBA. The fund is will­ing to sell, but the two sides are at odds over the price.

An expect­ed court rul­ing in July will help pro­vide a for­mu­la for set­ting a price for part of the stake. The two sides will then have to nego­ti­ate sep­a­rate­ly on a price for Fiat to buy the rest. If an agree­ment isn’t reached, the fund aims to sell its shares in an IPO. But that would be a cost­ly step and make it hard­er for Fiat to end up with 100% of Chrysler.

Mr. Mar­chionne has said that Fiat, which end­ed its lat­est quar­ter with €11.1 bil­lion ($14.4 bil­lion) in cash, has enough liq­uid­i­ty to buy out the stake [NOTE: ana­lysts dis­agree] which could cost any­where from $1.75 bil­lion to $4.27 bil­lion based on Fiat and trust cal­cu­la­tions.





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