The Truth About Cars » Chrysler IPO The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Thu, 17 Jul 2014 11:00:59 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Chrysler IPO Fiat Resumes Negotiations to Buy Rest of Chrysler from UAW VEBA Mon, 23 Dec 2013 12:30:14 +0000

Bloomberg is reporting that Fiat CEO Sergio Marchionne has resumed talks with the UAW’s retiree health care trust (aka VEBA) to buy the 41.5% of Chrysler that the Italian automaker doesn’t yet own. Fiat executives met last week with the trust’s representatives. The proposed initial public offering of Chrysler stock has been delayed for tax reasons until next year, creating a window of opportunity for a deal. Differing valuations on the stock prompted VEBA’s demand for the IPO, which would establish a market price for the stock, most likely more than Marchionne and the Agnelli family that controls Fiat want to pay.

Fiat recently upped its offer, the first it has made since August. That offer was rejected but apparently the parties are close enough that negotiations have resumed. According to Bloomberg’s sources, advisers to the IPO estimated a market valuation of approximately $10 billion for Chrysler. Based on those estimates, Fiat is said to be offering about $4.2 billion, while the trust wants at least $5 billion. While $800 million is still a lot of money, the two parties are closer than ever before. Fiat does have the right to buy the remaining stake for about $6 billion so it’s not as though a corporate raider is going to swoop in and snatch the rest of Chrysler from Marchionne’s grasp, but the Fiat CEO doesn’t want to overpay.

Marchionne wants to merge Fiat and Chrysler to be able to compete with larger global rivals, and also so that Fiat can access Chrysler’s profits to help them weather the weakness of Fiat’s core market in Europe and develop replacements for their aging product line there. The more Fiat pays for the remaining share of Chrysler the less cash the merged company will have for product development on both sides of the Atlantic Ocean.

On the other side of the negotiating table, the health care trust is holding out for a maximum payout, particularly since a recent analysis says that their anticipated costs to provide health care to Chrysler UAW retirees will still exceed VEBA’s current assets including the 41.5% stake in Chrysler by more than $3 billion.

Representatives for Fiat and Chrysler officially declined to comment.

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Fiat Says No Chrysler IPO Before 2014 Tue, 26 Nov 2013 11:30:54 +0000 fiat-and-chrysler-logos_100193029_m

Though Chrysler-Fiat CEO Sergio Marchionne had previously said that an initial public offering of Chrysler stock could take place by the end of 2013, the Italian automaker announced that stock sale will not take place before the new year. “The Board of Directors of Chrysler Group … has determined that it will not be practicable for Chrysler Group to launch and complete an initial public offering prior to the end of 2013,” Fiat said in a statement.


The sale could help resolve the dispute between Fiat and the UAW’s health benefits trust, which owns 41.% of Chrysler, over the valuation of that stake, but a delay in the IPO could also delay Fiat’s full acquisition of the Auburn Hills based automaker. Marchionne would like to merge Fiat and Chrysler to create the world’s 7th largest auto firm and give Fiat access to Chrysler’s profits. Chrysler had initially filed paperwork for an IPO in late September.

The Wall Street Journal reports that Chrysler would raise between 1.5 and 2 billion dollars with the IPO. That would give the company a market valuation of 9 to 12 billion dollars. Fiat declined to comment on the report.

Marchionne wants to merge the Fiat and Chrysler to create the world’s seventh-largest carmaker. Fiat has been hurt by the weak European market. The company’s plan to reduce losses in Europe depends on sharing technology, cash and dealer networks with Chrysler. The merger would also give Marchionne access to Chrysler’s profits and allow him to use that cash to shore up Fiat and expand its product offerings. The companies, while managed by the same people, must currently keep their finances separate.

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Under Pressure From UAW VEBA, Chrysler Files For IPO, Fiat Not Thrilled Tue, 24 Sep 2013 10:30:55 +0000 vebafiatchrysler

After Fiat and Chrysler’s retired UAW workers’ health care benefits trust were unable to agree on a price for the Voluntary Employees Beneficiary Association‘s 41.5% share in the Auburn Hills automaker, at the trust’s request Chrysler has filed initial paperwork for a public stock offering to sell part of the VEBA’s stake, about 16% of overall Chrysler shares, the first time in over a decade that the public will be able to own shares in Chrysler, which formerly was wholly owned by Cerberus and before that Daimler. Fiat certainly would rather the IPO not take place now as it complicates Fiat and Chrysler CEO Sergio Marchionne’s plans for the Italian automaker to acquire full ownership of Chrysler. The benefits trust has the legal right to force Chrysler to make the stock offering so the VEBA can cash out on the shares it received in exchange for giving up financial claims against Chrysler during the company’s bankruptcy and bailout by governments in the United States and Canada.

Not only does the VEBA have an opportunity to get a windfall of cash, a billion dollars or more, it also gets a chance to let the open market decide on the value of the remaining ~25% of Chrysler it will still own after the IPO, as the trust continues to negotiate with Fiat. Some automotive industry pundits see the request for the IPO as a tactic by the trust to get a higher price from the Italian car company. “It’s a very, very high-stakes battle going on here,” said Harley Shaiken, a professor of labor at the University of California-Berkeley. “Both sides are being quite strategic, and we’ll see how it plays out.” Marchionne told analysts earlier this year, “Fiat remains available to continue the discussion.”

In the background there is also an ongoing court case over the valuation of the trust’s stake, said by Fiat to be worth $3 billion and by the VEBA significantly more than that.

There are risks in an IPO for all three parties, the VEBA, Chrysler, and Fiat. Possible investors might shy away since the logical buyer, Fiat, won’t be participating. That could depress the stock value, which wouldn’t be a good thing for Chrysler, or for the matter, Fiat, which owns the other 58.5% of Chrysler.

The IPO would not change Fiat’s control over Chrysler, but without 100% ownership, Fiat cannot tap into the cash reserves Chrysler has banked on its success since the bankruptcy. In the second quarter of 2013, Chrysler profits were over half a billion dollars, up 16% from the same quarter in 2012. Those revenues have helped offset weakness in Fiat’s main market in Europe.

The JPMorgan Chase bank will be underwriting the I.P.O.

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