Italian automaker Fiat SpA announced that it had reached an agreement to acquire the remaining shares of Chrysler for US$3.65 billion in payments to a union-controlled trust fund.
Fiat already owns 58.5 percent of Chrysler’s shares, with the remaining 41.5 percent held by a United Auto Workers (UAW) union trust fund that pays healthcare bills for retirees.
Under the deal announced on Wednesday, Fiat will make an initial payment of US$1.9 billion to the fund, plus an additional US$1.75 billion upon closing the deal.
Chrysler will also make additional payments totaling US$700 million to the fund as part of an agreement with the UAW.
The deal is expected to close on or before Jan. 20, according to a statement from Chrysler.
Sergio Marchionne, chief executive officer of both Fiat and Chrysler, has long sought to acquire the union’s shares in order to combine the two companies.
“The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how, a solid and open organization,” Marchionne said in a statement issued by Fiat.
The deal eliminates the need for an initial public offering of the union fund’s stake, which analysts had previously valued at US$5.6 billion.
Fiat went to court last year seeking a judgement on the price, but the trial date was set for September this year.
Marchionne cannot spend Chrysler’s cash on Fiat’s operations unless the companies merge.
In recent months he made it clear that he preferred to settle the dispute without an IPO, but filed the paperwork for the offering in September last year at the trust’s request. Chrysler’s profits have helped prop up Fiat on the balance sheet as the Italian automaker struggles in a down European market.
The Auburn Hills, Michigan, automaker earned US$464 million in the third quarter on US sales of the Ram pickup and Jeep Grand Cherokee, its ninth-straight profitable quarter. The results boosted Fiat, which earned US$260 million in the quarter. Without Chrysler’s contribution, Fiat would have lost US$340 million.