Fiat Exercising Options to Increase Chrysler Stake to 65%
Fiat SpA (F), the Italian carmaker that controls Chrysler Group LLC, plans to boost its stake in the U.S. company to 65 percent by exercising its option to purchase an additional 3.3 percent from the United Auto Workers’ retiree health-care fund.
Fiat calculated it has to pay $198 million for the second tranche of the voluntary employees beneficiary association’s holding based on “a market multiple” applied to Chrysler earnings before interest, taxes, depreciation and amortization, according to a statement.
Fiat, which in July exercised its option to purchase a first 3.3 percent tranche of the remaining VEBA holding, in September asked a U.S. court to confirm the price it has to pay to increase its controlling stake in the Auburn Hills, Michigan-based carmaker after failing to reach an agreement with the VEBA, which owns 41.5 percent of the company. Turin, Italy-owned Fiat owns the rest.
Chief Executive Officer Sergio Marchionne has said Fiat’s ability to complete a full merger with Chrysler is limited by a turnaround plan for Fiat announced in October. The 60-year-old executive, who leads both automakers, has said Fiat still plans to use call options that were part of Chrysler’s 2009 bankruptcy and now are in dispute.
Fiat must pay at least $342 million to boost its ownership stake to almost 62 percent, the U.S. automaker’s minority shareholder said in a court filing in November. The amount sought by VEBA is 145 percent more than the Italian carmaker said the holding should be worth.
Fiat said today it expects a determination by the court “within the next several months.”
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