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.