Marchionne Wins CNH Support for Fiat Industrial’s Offer
CNH “views favorably the latest enhanced offer,” a board committee evaluating the proposal said in a statement today. “The special committee has directed its advisers to work with Fiat Industrial to negotiate definitive documentation.” Fiat Industrial aims for a final merger deal by Nov. 25.
The new company will have its primary listing in New York and keep Milan as a secondary listing, said a person familiar with the deal, who asked not to be identified before an official announcement.
Fiat Industrial, which already owns 88 percent of CNH, raised its offer for the rest of the tractor maker by 26 percent on Nov. 19 after the Amsterdam-based company spurned an earlier proposal. The maker of Iveco trucks, which was spun off from Fiat SpA (F) in 2011, boosted its bid with a $10-per-share special dividend for CNH owners, which will get 3.828 shares in the merged entity for each share they own. Fiat Industrial investors will swap their stock one for one.
“It’s been above board, reasonably quick and the extra paid seems pretty fair,” said Max Warburton, a Bernstein Research analyst in London with an outperform rating on the shares. “Both sides get a more liquid, clearer equity story, so I think everyone wanted to see this get done.”
Marchionne, who’s targeting more than 25 billion euros ($32 billion) in sales for Fiat Industrial this year, is seeking to create in the combination the world’s third-largest capital- goods company, which won’t use Fiat in its name. The merged entity would have a product range spanning Iveco delivery trucks, New Holland harvesters and FPT ship engines.
Fiat Industrial rose as much as 14 cents, or 1.7 percent, to 8.54 euros and was up 1.1 percent as of 12:56 p.m. in Milan. The stock has gained 28 percent this year, valuing the company at 10.4 billion euros. CNH closed down 4 cents at $47.50 in New York yesterday, valuing the tractor maker at $11.4 billion.
The remaining 12 percent CNH stake is worth $1.37 billion at the current market price. The special dividend for the holding totals $278 million. CNH last month rejected Fiat Industrial’s proposal to combine the two in a share exchange with no premium for CNH investors as “inadequate.”
“It is gratifying for both companies to take this step, which should enable CNH to put in place plans to pay the extraordinary dividend to CNH minority shareholders by the end of this year,” Marchionne said today in a statement.
Fiat Industrial is reorganizing in response to the debt crisis in Europe. Its Iveco truck unit announced plans in July to shut five plants in Europe by the end of 2012 because of the sovereign-debt crisis in the region.
CNH CEO Richard Tobin was appointed chief operating officer for Fiat Industrial to help with the integration. JPMorgan Chase & Co. and Lazard Ltd. (LAZ) advised the CNH committee.
“CNH gave its green light and this bring back the focus on fundamentals,” said Massimo Vecchio, an analyst for Mediobanca in Milan.
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