Italy’s Fiat SpA expects to pay about US$1.5 billion for an additional 16 percent stake in Chrysler, which it hopes to buy later this year after the US automaker repays government loans, three people familiar with the matter said.
Italy’s biggest industrial group is also working to raise about 1.5 billion euros (US$2.17 billion) through a credit facility and is expected to launch the deal in coming months, according to one of the people familiar with Fiat’s thinking.
The credit facility is planned for the Italian automaker’s general liquidity purposes and is expected to remain undrawn.
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Fiat, which currently holds a 30 percent stake in Chrysler, aims to obtain majority control of the US automaker by the end of this year — one of Fiat chief executive Sergio Marchionne’s overarching goals as he tries to integrate the two car companies.
As part of the 2009 bailout deal agreed with Washington, Fiat was given management control and a minority stake in Chrysler. Under the terms of the US Treasury agreement, Fiat can exercise an option to buy a 16 percent stake in Chrysler if the loans it owes the US and Canadian governments fall below US$4 billion.
People familiar with the matter said on Thursday that Chrysler was close to launching a debt refinancing package to repay all of its roughly US$7 billion owed to the US and Canadian governments and the deal could be completed by June.
Repaying the loans stemming from its historic 2009 bailout would mark a critical step for Chrysler as the No. 3 US automaker tries to distance itself from the controversial rescue by US President Barack Obama’s administration and rebuild consumer confidence in the brand.
A financial integration of the two automakers, both of which struggled in their own markets, could also make Chrysler a better story for potential stock investors when the company eventually goes public later this year or next.
Chrysler’s initial public offering, which was originally expected to take place in the second half of this year, could be pushed into next year as Fiat first wants to secure majority control of the US automaker, a possibility Marchionne suggested late last month.
However, before Fiat can take control, Chrysler must repay its loans to the US and Canadian governments in full. Chrysler owes US$5.8 billion to the US government and US$1.3 billion to the Canadian government.
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