In $4.35 Billion Deal, Fiat Will Acquire Rest of Chrysler From UAW Retiree Health Care Trust

by TTAC Staff

Updated: February 18th, 2014 Published: January 2nd, 2014

in 4 35 billion deal fiat will acquire rest of chrysler from uaw retiree health

Fiat SpA said on Wednesday that it has signed an agreement to buy the remaining 41.5% stake in Chrysler that it does not own from the United Auto Worker’s retiree health-care trust, known as VEBA, for $3.65 billion in cash up front and another $700 million after the deal is completed. The agreement will allow Fiat and Chrysler CEO Sergio Marchionne to realize his dream of creating a global automotive group out of the two companies. The joint automaker would be the 7th largest in the world.

Fiat and the trust have been negotiating over the stock’s value for more than a year. Part of that sparring included the VEBA exercising its option to force an initial public offering of Chrysler stock to determine a true market value. An IPO would have made it more difficult for Marchionne to consolidate the two firms but now it’s a moot point, as is the lawsuit filed by Fiat to determine a share price.

According to the terms of the deal, Fiat will put up $1.75 billion and Chrysler $1.9 billion, both in cash, to buy out the trust, with the remaining $700 million to be paid out by Chrysler in equal annual payments over four years. The contracts will be signed and the deal closed on or before January 20, 2014. Because some of the cash is coming from Chrysler, Fiat will not have to make any capital increase through a rights issue.

Marchionne needs Chrysler’s cash and current profitability to prop up Fiat, suffering because their core market, Europe, is still in the doldrums, but he can’t spend Chrysler’s cash on Fiat’s operations without a formal merger. Chrysler booked $464 million in profits in the third quarter of 2013 on strong sales of the Ram pickup and Jeep Grand Cherokee in North America. That was the Auburn Hills based automaker’s ninth straight quarterly profit. Fiat’s share of Chrysler’s profits were $260 million and without them Fiat would have lost $340 million for the quarter.

#Chrysler #Fiat #Finance #Mergers #Uaw #UAWVEBA

TTAC Staff

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Jim brewer on Jan 02, 2014

It sounds like an early 1980's style leveraged buyout. Chrysler sells at 5X pe ratio in a recessionary economy. Whatever Fiat borrows money at, its a heck of a lot less than 20%. So the deal is strongly cash flow positive from day one and seems poised to improve as the economy improves.

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Inside Looking Out on Jan 04, 2014

Daimler got rid of Chrysler because of UAW's militant position during negotiations. Unlike Americans Germans do have a patience for stupidity. There was feeling that UAW will sink Chrysler or whatever left of Chrysler and it will affect the future of iconic Mercedes brand. Nobody wants liability. Dr Z warned UAW and LaSorda to wake up and in the end they got what they deserved. It is easy to depict Germans like a dark force but in the end they are simply effective, common sense, pragmatic and disciplined nation.

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- 28-Cars-Later on Jan 04, 2014
  
  "Dr Z warned UAW and LaSorda to wake up and in the end they got what they deserved." They deserved liquidation, unemployment, and prosecution. What they got is quite the opposite.
  
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- Inside Looking Out on Jan 05, 2014
  
  @28-Cars-Later That's America. People selfish, confrontational and not very cooperative for common good. And politicians think only about reelection for the next term. May be it was different before 2000 but since 2000 I am here I did not see any common sense in Government decisions to be it Republicans or Democrats. Both spend enormous amount of money with no real reason.
  
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- Highdesertcat on Jan 05, 2014
  
  @Inside Looking Out Now that Fiat owns them outright, the UAW has been further marginalized. What I believe is that we will see more radical decisions flow from the Fiat BoD and the UAW will just have to suck it up and deal with it, or lose their jobs as production is moved elsewhere. And it will be moved elsewhere, like Brazil, as an example. Fiat is on the move. The question is, will Fiat revert back to the "Fix It Again, Tony" syndrome synonymous with the Fiat-experience of the past? Things were really, really bad when Fiat was here before. Fiat 128, anyone?
  
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- Jz78817 on Jan 05, 2014
  
  you are so full of horsecrap your eyes are greenish-brown. Daimler got rid of Chrysler because Daimler had no plan for how Chrysler was going to fit within Führer Schrempp's Reich, and royally screwed Chrysler up in the process until it was unsalvageable. It was those Nazis Wolfgang Bernhard and Dieter Zetsche who delivered an edict that 40% of the cost had to be taken out of the interiors of Chrysler vehicles, regardless of outcome. Cite: http://www.businessweek.com/stories/2008-03-02/hes-baaaaaaaack-dot-peter-arnell-shakes-his-stuff-at-chrysler-dot It was (German) Joachim Eberhardt who commanded Chrysler factories to keep cranking out trucks with no buyers, and threatening dealers to take them or else. "There was feeling that UAW will sink Chrysler or whatever left of Chrysler and it will affect the future of iconic Mercedes brand. " The UAW didn't sink Chrysler, Daimler did. And you hint at why they did it. They did it because they wanted to protect their precious Mercedes-Benz at all costs. Well, as far as I'm concerned, Mercedes-Benz can go to hell, and Daimler AG can go to hell too. After what Daimler did to destroy Chrysler (and spent much effort to whitewash it,) I will never, EVER, even so much as *touch* a German car. Ze Germans destroyed Chrysler. No ifs, ands, or buts. any attempt to say otherwise is bunk. I don't know how the FIAT mash-up is going to work out, but from the little I've seen, the Italians aren't squatting down and taking massive dumps on Auburn Hills like the StuttgartReich did.
  
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- Highdesertcat on Jan 05, 2014
  
  @jz78817 This is exactly why I enjoy reading ttac -- two diametrically opposed views of the same situation where each faction holds fast to their own assessment. Fascinating!
  
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- Jz78817 on Jan 05, 2014
  
  @highdesertcat at least I linked support for one of my assertions. "Inside Looking Out" seems to think the only support he needs is "Germans are always right."
  
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