Fiat Chair Marchionne – One for the history books

AUBURN HILLS, Mich. – Business – Fiat is taking full ownership of American Auto Giant Chrysler. The price of stock in Fiat, the Italian car giant have increased by more than 15 per cent. The jump in the share price comes after the announcement by the company to purchase the remaining 41% of American auto giant Chrysler.

Fiat has been the majority owner of Chrysler since 2009.

Massive Deal Comes as Chrysler Turns Profit

Chrysler Group LLC net income for the third quarter of 2013 was $464 million, an increase of 22 percent from $381 million a year ago. Worldwide vehicle shipments were 593,000 for the quarter, up 6 percent from 559,000 a year ago; and worldwide vehicle sales for the third quarter were 603,000, up 8 percent from a year ago, driven primarily by a 16 percent increase in U.S. retail sales.

The agreement ends long negotiations with the current owners, Veba, the healthcare trust affiliated to the United Auto Workers’ union (UAW).

The move creates the seventh-largest car company in the world.

In consideration for the sale of its membership interests in Chrysler Group, the VEBA Trust will receive aggregate consideration of U.S.$3,650 million consisting of:

• A special distribution payable by Chrysler Group to its members, in an aggregate amount of approximately U.S.$1,900 million (FNA’s portion of the special distribution will be paid by FNA to the VEBA Trust as part of the purchase consideration)2; and
  at closing, FNA will pay the remainder of approximately U.S.$1,750 million in cash purchase consideration to the VEBA Trust.
• Fiat expects to fund the U.S.$1,750 million in cash from available cash on hand. Chrysler Group expects to fund the special distribution from available cash on hand.

Contemporaneously with the transactions described above, Chrysler Group and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”) have agreed to a memorandum of understanding under Chrysler Group’s existing collective bargaining agreements to provide for additional contributions by Chrysler Group to the VEBA Trust of an aggregate of U.S.$700 million in four equal annual installments. The initial payment will be made on closing of the transaction with Fiat and additional payments will be payable on each of the next three anniversaries of the initial payment. Chrysler Group expects to fund the initial contribution to the VEBA Trust from available cash on hand.
Chrysler and Fiat will pay the Veba trust an initial $3.65bn.

Once the deal is signed off, Chrysler will pay Fiat another $700m.

Fiat chief executive, Sergio Marchionne, said the plan is to broaden Fiat’s global reach. Marchionne says that the deal is one of his life’s “defining moments that go down in the history books”.