Carmaker Fiat-Chrysler is aiming to list in New York within the year, underlining the group’s emergence as a US-centric organisation following chief executive Sergio Marchionne’s successful broker of a full merger of the US group with its Italian partner.
In a long-awaited deal, Fiat announced on New Year’s day it would buy the 41.5 per cent of Chrysler that it does not already own from the Veba union healthcare trust for a total of $4.35bn.
The completion of the deal by January 20 will be followed by a shake up of the merged group’s corporate structure in line with its global footprint, banking sources said. Half of Fiat-Chrysler’s combined volumes come from North America.
Banking sources said CNH Industrial, a sister company to Fiat-Chrysler, is a template for the governance and corporate structure of a fully integrated Fiat-Chrysler. Born out of Fiat, the industrial goods group is a Netherlands-registered company, listed in New York, with a secondary listing in Milan and tax domicile in the UK.
Fiat shares rose 16 per cent on news of the deal to €6.92, the biggest intraday gain since 2009. The stock had risen 57 per cent in 2013.
Max Warburton, an analyst at Bernstein Research, said the costs and financing of the deal were more favourable to Fiat than the market expected. “The deal successfully secures Fiat’s operational and financial future,” he added.
Fiat, which already owns 58.5 per cent of Chrysler, will pay the trust $1.75bn in cash when the deal closes. Chrysler will contribute $1.9bn through a special dividend to complete the transaction for the 41.5 per cent stake.
Chrysler will also pay the trust $700m in four annual instalments, with the first to be made when the deal closes. Fiat said it would not need to raise cash to complete the deal. Fiat-Chrysler’s net debt will rise to about €10bn excluding pension contributions, said Philip Watkins, car analyst at Citigroup.
People familiar with Mr Marchionne’s thinking say a fully merged Fiat-Chrysler could issue a convertible bond in the region of €1bn to €1.5bn in tandem with its launch on the New York Stock Exchange to help ease that debt load.
The full merger of Fiat and Chrysler crowns Mr Marchionne’s decade-long turnround of the Italian and US carmakers and underlines his reputation as a consummate dealmaker. It also shifts focus sharply on to succession planning at the group.
People close to Mr Marchionne, one of the longest running car industry chief executives, expect the three-year business plan due to be presented in the spring to be his last triennial plan for the group.