Italian manufacturer, Fiat SpA, last Thursday announced it had secured full ownership of Chrysler Group LLC in a $4.35 billion deal that will conserve the Italian companys cash while creating a global carmaker to compete with the likes of General Motors, Ford Motor, Volkswagen AG and Toyota Motor. Chrysler, the No. 3 U.S. automaker, will put up most of the funding for the transaction, underscoring the CEOs reputation as a dealmaker. The transaction is expected to close on or before January 20, 2014.
Fiat S.p.A. reached an agreement with the VEBA Trust1 (Voluntary Employees Beneficiary Association of UAW Retiree Medical Benefits Trust), under which its wholly owned subsidiary, Fiat North America LLC (FNA), will acquire all of the VEBA Trusts equity membership interests in Chrysler Group LLC, representing the 41.46% of Chrysler Group not currently held by FNA.
Fiat, which already holds 58.5 percent of Chrysler, will pay the trust $1.75 billion in cash when the deal closes, Fiat said in a statement. Chrysler will contribute $1.9 billion through a special dividend to complete the transaction for the 41.5 percent stake.
In addition, Chrysler agreed to pay the trust $700 million in four annual installments, with the first to be made when the deal closes. Fiat said the money would come from cash on hand and that a share sale probably wont be needed.
The trust, structured as a voluntary employee beneficiary association, will end plans for an initial public offering of its Chrysler stock. Fiat and the trust will also drop legal action in Delaware intended to resolve a valuation dispute.
Including earlier purchases of holdings from the U.S. and Canadian governments, Fiats spending on Chrysler stakes will total $3.7 billion. That compares with the $36 billion that the then Daimler-Benz AG paid for the U.S. company in 1998.
