Fiat considers public offering after purchasing Chrysler shares: source

AP, DETROIT, Michigan

Fri, Apr 26, 2013 - Page 15

Italian automaker Fiat is considering a plan to hold a public stock offering after the company buys 100 percent of Chrysler, according to a person briefed on the matter.

The plan to sell shares of a combined company is among several options being evaluated by Sergio Marchionne, who serves as chief executive officer of both automakers, said the person, who requested anonymity because no decision has been made.

A stock offering would raise much-needed money for research on new vehicles at both companies, and could help Fiat weather the economic downturn in Europe.

Fiat now owns 58.5 percent of Chrysler, and wants to buy the remaining 41.5 percent from a health care trust fund for union retirees.

The two sides differ on price, and that may be decided by a US court.

Fiat and Marchionne were appointed to manage Chrysler in 2009 by the US government, which had bailed out the struggling company and funded its trip through bankruptcy restructuring.

Since then, Fiat has raised its stake in a resurgent Chrysler, and Marchionne wants to merge the companies to generate more cost savings from joint research, management and purchasing.

Fiat SpA shares are now traded publicly on the Milan stock exchange, while Chrysler is technically a private company with no publicly traded shares.

Presumably, Fiat shareholders would be offered a stake in the new company if they approve the merger.

No decision has been made on where to list shares of the new company, the person said.

However, Marchionne has repeatedly told reporters that US stock markets are more profitable than those in Italy.

Merging the companies would give Fiat access to Chrysler’s cash holdings. Currently, Fiat shares in Chrysler’s profits, but cannot use the Detroit automaker’s funds for its own operations.

Without Chrysler, Fiat would have lost US$1.41 billion last year.

Chrysler had US$11.6 billion in cash at the end of last year.

Both Chrysler and Fiat are scheduled to report first-quarter earnings on Monday.

Marchionne has said Fiat has 10 billion euros (US$13 billion) in cash that can be used to cope with a severe slowdown in European auto sales and buy the trust fund’s stake in Chrysler.

Like Fiat, the trust got its stake in Chrysler from the government.

At the time that Chrysler filed for Chapter 11, it owed the trust about US$4 billion as part of a deal with the United Auto Workers to take over retiree health care costs.

The trust fund needs cash to pay medical bills for thousands of Chrysler blue-collar retirees.

In order to monetize its stake in Chrysler, it either has to sell the shares to another party, such as Fiat, or sell shares of Chrysler to the public — which could happen if Fiat and the trust cannot agree on a share price.