Fiat SpA (F) is in talks to buy the remaining stake in Chrysler Group LLC and is pursuing parallel discussions about refinancing debt of both carmakers.
Sergio Marchionne, chief executive officer of the two manufacturers, is discussing the purchase of the remaining shares in Chrysler with the United Auto Workers’ retiree health-care trust, which owns the stake, to push ahead on a merger between Fiat and the U.S. carmaker.
“We have been working on the project for a long time, we’ll try to complete it as soon as possible,” the executive said today in Venice.
Marchionne is also talking with banks about refinancing Chrysler debt as well as Fiat’s 1.95 billion-euro ($2.6 billion) revolving credit line. Chrysler has a $2.9 billion term loan and $3.2 billion in secured notes outstanding, according to an April 29 presentation.
Fiat, Italy’s biggest manufacturer, has accumulated a 58.5 percent holding in Chrysler since 2009 and plans to buy the rest as it seeks a global presence to compete with General Motors Co. (GM) and Volkswagen AG. (VOW) The Italian manufacturer is in talks with a pool of banks for as much as $10 billion in funding for the deal and for refinancing the companies’ debt, people familiar with the matter said on May 29.
Marchionne said today that the group had sufficient resources to buy the Chrysler stake and “no immediate need” for fresh funds. Fiat doesn’t require $10 billion in additional financing, the executive said at the annual meeting of the Council for the U.S. and Italy.
Fiat gained as much as 18 cents, or 3 percent, to 6.09 euros and was up 2.3 percent as of 3:37 p.m. in Milan trading. The stock has gained 60 percent this year, valuing the automaker at 7.57 billion euros.
Talks with the UAW trust to buy a 41.5 percent stake are ongoing, even as the two sides are locked in a legal battle over the price, he said. Whether an agreement is reached before a Delaware court decides on the dispute “depends” on the union trust, Marchionne said.
A merger between Fiat and Auburn Hills, Michigan-based Chrysler would create a manufacturer grouping the mass-market Fiat, Chrysler, Jeep and Dodge brands with the Maserati and Ferrari supercar marques. Fiat will probably wait for a ruling in the lawsuit about the value of the labor group’s stake before moving forward, Chairman John Elkann said on May 30.
The legal dispute between Fiat and the retiree health-care trust centers on whether the Italian company should increase its $139.7 million offer in a call option for a 3.3 percent Chrysler stake. The trust values the contested holding at a minimum of $342 million. The Delaware judge overseeing the case said in April that he’s “kind of leaning” in the trust’s direction.
Under the disputed agreement, Fiat holds options that require the labor group to sell almost 17 percent of Chrysler. Fiat is negotiating on the purchase with the trust, which also has the legal right to push for an initial public offering of Chrysler.
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