Chrysler Feud Triggers IPO

REPLAY VIDEO
Your next video will start in
Pause
  • Info

  • Comments

  • VIDEO TEXT

Sept. 24 (Bloomberg) -- Bloomberg's Jamie Butter and Jeff McCracken reports on Chrysler filing for an IPO and listing JPMorgan as the underwriter. They speak with Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Effectively paid twice for the last 16 episodes so apple is sending them i tune vouchers for $23. chrysler is getting ready to return to the public market, or maybe.

The company filed for an i.p.o. in the afternoon but it is not the whole story and may be a negotiating ploy and in a dispute with the man who own as majority stake in chrysler and health care trusts for u.a.w. employees.

We have our in house auto expert matt miller, bloomberg news editor jamie butters and rounding out our roundtable, the head of our i.p.o. reporting here at bloomberg, jeff mccracken.

Gentlemen, welcome.

Let's begin with you, jamie.

This is a little unusual for a company.

It's happened before but we see an i.p.o. filing from chrysler except it's really not from chrysler.

It's not from chrysler and it's not for an i.p.o. but you've got the u.a.w. wants to get as much money as they can to pay for health care for its retirees and of course sergio marcioni wants to pay as little as possible to bring them together and they're at an impasse and turning to the market to tell them whose side they're on.

This is the u.a.w. health care right?

The u.a.w. health care trust can force the issue and require the filing and that the process begin but it's marcioni's management team running it.

So you see all these sort of backhanded statements.

You normally see a lot of things in the risk factors that will explain things that could go wrong, financing, economic growth but they're pointing out fiat may not have the same wishes as chrysler.

It's important to note for viewers who don't follow this every day, sergio mercioni is also the c.e.o. for chrysler and fiat and puts him in an awkward position because in his fish -- fish fiduciary duty to chrysler, this union trust because they don't own over 40% he has to get the maximum prize possible for his stake.

As the c.e.o. of fiat, if his fiduciary duties has to may the minimum stake.

They are at loggerheads.

He's trying to turn both companies around.

There is an interesting wrinkle to this story which is the role of jp morgan.

If you look at the s-1 filing, you look at what chrysler submitted to the s.e.c. yesterday you see jp morgan as the lead underwriter on, again, this stock offering.

I know it's curious but explain to us the curious nature of jp morgan's involvement?

You go way back in history four years ago when chrysler was in a freefall and eventually moved to bankruptcy.

The largest creditor and the bank that took the biggest haircut was jp morgan.

They had lent a surplus when it acquired chrysler and took even more risk or took even more debt when they bought bear stearns and ended up getting 30 cents on the dollar.

The gentleman we just had on a while ago, jimmy lee, was the lead negotiator and was painful for jp morgan to receive 30 cents on the dollar on a several billion dollar loan and had a contentious relationship with sergio because of that situation.

Jp morgan is among the biggest bank in the world and has the largest balance sheet of any bank in america.

Certainly at some point, even scrappy guys like jimmy lee want bygones to be bygones because there's business to be had from fiat and chrysler in the years ahead.

This situation jamie is alluding to sergio didn't pick jp morgan, the folks within u.a.w. picked jp morgan.

The bank knows the company intimately because of what i alluded to earlier.

There are a lot of familiar names bouncing around.

We wrote last week ron bloom who worked for treasury giving chrysler to fiat now guess who he is working for?

He's working for sergio.

Jamie, help us understand.

What we're really trying to figure out at this point given what we just learned is what happens next?

Do we have any idea what sergio's next marketing tactic is going to be and matt, whether this health care trust that they call the viba has any chances of getting this offering through over marioni's objections?

There is a question whether they want to get it through and whether they're just using this -- as just a ploy.

And they're going to go through the process and see if the market says this is worth $3 billion or worth $8 billion.

If they say $8 billion, marcioni can buy for six and if they say four, he can say i'll give you $4 billion and $100. the kiting part is fiat may not be able to survive at all without chrysler.

They would have lost $1 billion last year had they not had chrysler.

They also don't have the scale to compete on a global level.

With chrysler it sold 4.2 million vegs and isn't as many as ford or g.m. or as many as v.w. if sergio can get this merger done, he can do so many things and one of the things he wants to do is relaunch the alpha romero -- alpha romeo brand.

And he also wants to marry the technology in manufacturing.

For example, mawsrauty, he wants to sell 50,000 masaratis by 2015 and he doesn't sell 10 and wants to do that by building an s.u.v. on a jeep platform using a ferrari engine because he owns that company, too, and putting them together in a mazarati suspension.

He needs these things to come together and have full control to make it happen but if he can't the plan is off the table.

Jp morgan has thrown its hat in the ring working for the health care trust.

What other banks might want to play a role in these negotiations?

We actually feel we know what other banks are involved.

I don't want to say anything yet.

But there are others around it.

If you look back who lost a lot of money when chrysler was under, goldman and citi were under that situation.

There were big banks that took haircuts in 1999 on chrysler.

I have a feeling it's the beginning of a fascinating story.

Jamie butters with us in new york this time, usually in detroit.

Our own auto guy here on bloomberg television in matt miller and jeffrey mccracken who leads our mergers and acquisition and i.p.o. coverage at bloomberg.

Now we'll shift gears and talk about a company trying to go private, talking about blackberry.

May have finally found a white knight in the form of fairfax financial holdings, already its biggest shareholder but the specifics of this proposed $4.7 billion acquisition remains very murky.

Hugo miller is our resident blackberry-ologist and is in our toronto area, as usual.

Let's talk about what little if anything we know about the financing.

Fairfax is a large investor but it doesn't have $5 billion to throw around.

Who is fairfax partnering with and who is going to get all the money?

Good morning, eric.

We had a very interesting discussion with prime yesterday and he was short on details, as indeed the announcement of this letter of intent to buy blackberry yesterday.

To my surprise, he said that they intent to commit nothing more than their existing equity state.

They're going to roll over, give or take $500 million stake in blackberry but he said i'm not going to commit any more of fairfax's money and am expecting my partners to do so and yet he hasn't named the partners.

The one person we do know is not involved at this point is the founder, an inventor of the

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change