Fiat Industrial Plans to Move Listing to U.S. From Italy
Fiat Industrial SpA (FI), the truck and tractor manufacturer that carmaker Fiat SpA (F) spun off in 2011, plans to move its primary listing to New York from Milan after merging with its CNH Global NV (CNH) unit in a blow to Italy.
Fiat Industrial, which controls the tractor maker through an 88 percent stake, proposed to CNH’s board the creation of a new company in a share exchange that wouldn’t include a premium for either companies’ investors, the Turin, Italy-based company said in a statement today.
The transaction would create the world’s third-largest capital goods company, according to Fiat Industrial, with a product range that includes Iveco delivery trucks, New Holland harvesters and FPT ship engines. Fiat Industrial Chairman Sergio Marchionne targets 25 billion euros ($31.1 billion) in sales this year, including Amsterdam-based CNH.
“With the crisis in Europe and an Italian exchange not very liquid, it’s obvious that a global player with a strong presence in the U.S. would seek a New York listing,” said Giuliano Noci, associate dean at MIP Politecnico in Milan. “Fiat Industrial may presage a similar move of Fiat and Chrysler.”
Fiat, which owns 58.5 percent of U.S. auto manufacturer Chrysler Group LLC, aims to merge the two carmakers to boost revenue to more than 100 billion euros in 2014. Marchionne hasn’t disclosed yet where the combined entity will be listed and based.
He said today on a conference call with analysts that while there is a “technical blueprint” to replicate the deal for Fiat and Chrysler, the group is “miles away” from “being able to action anything like that.”
Marchionne has been looking for a way to buy out minority CNH shareholders, who own a stake worth about $1.15 billion at current market values. He said last month that Fiat Industrial was working on a solution after the parent company simplified its capital structure by converting its saving and preferred shares into common stock.
The chairman said today that the decision to move the primary listing to New York was driven by better access to capital markets and not the downturn in Europe. Marchionne also said the group has been analyzing how it would react to a Greek exit from the euro, which he sees as a “very distant” possibility.
The new structure would create a single class of stock listed in New York with a secondary listing in Europe which may not be in Milan, Marchionne said. The new company, which will likely be based in the Netherlands, won’t carry the Fiat name and will have “no legal link with the Italian market,” he said.
“The deal makes sense as it simplifies the structure of the company,” said Emanuele Vizzini, chief investment officer of Investitori Sgr in Milan. “It’s is also a sign of Marchionne’s center of gravity moving to the U.S.”
Exchange ratios for the new company will be based on “undisturbed” share prices from March and April, according to today’s statement. CNH and Fiat Industrial shareholders won’t receive a premium because cost savings will probably be “minimal,” the Italian company said.
The closing will be subject to a 250 million-euro cap on Fiat Industrial shareholders’ withdrawal rights, the company said. The proposal includes incentives for investors to hold on to the stock “to facilitate a stable shareholder base,” the company said. The incentives include doubling the voting rights for investors that keep the shares at least three years.
CNH’s board hasn’t yet fully evaluated the proposal, the tractor manufacturer said in a separate statement.
“The proposed move will have one key effect, reduction in borrowing costs for the combined entity given a U.S. listing versus the present Italian one for Fiat Industrial,” said David Arnold, a sales specialist at Credit Suisse in London.
Exor will still control the resulting company, Mediobanca analysts wrote in a note to clients today. The withdrawal right is priced at 7.64 euros per share as of today, Mediobanca said.
To contact the reporter on this story: Tommaso Ebhardt in Milan at firstname.lastname@example.org