Fiat acquires remaining stake in Chrysler in $4.35 bn deal

Italian carmaker Fiat SpA on Wednesday agreed to acquire the remaining stake in Chrysler Group LLC, in a $4.35 billion deal, to create the seventh largest car maker in the world.

Chrysler CarFiat and the VEBA Trust, the retiree health-care trust run by the United Auto Workers (UAW) union have shared ownership of Auburn Hills, Mich-based Chrysler since its 2009 bankruptcy.

Under the agreement, Fiat North America LLC, which already holds 58.5 per cent of Chrysler, will acquire the remaining 41.4616 per cent equity interests in Chrysler Group LLC from VEBA Trust, the voluntary employees' beneficiary association.

Fiat will pay the VEBA Trust an aggregate of $3.65 billion in consideration of the sale of its holding in Chrysler Group at the closing. In addition to the price for the stake, Chrysler agreed to pay the trust $700 million in four annual installments, with the first to be made when the deal closes.

Fiat will make a special distribution payable by Chrysler Group to its members of an aggregate amount of approximately $1,900 million (FNA's portion of the special distribution will be paid by FNA to the VEBA Trust as part of the purchase consideration). FNA will pay the remainder of approximately $1,750 million in cash purchase consideration to the VEBA Trust.

Fiat expects to fund the $1,750 million in cash from available cash on hand. Chrysler Group expects to fund the special distribution from available cash on hand.

Fiat expects the transaction to close on or before 20 January 2014.

Simultaneously, the Chrysler Group and the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) also agreed to sign a memorandum of understanding to provide for additional contributions by Chrysler Group to the VEBA Trust of an aggregate of $700 million in four equal annual installments.

The initial payment will be made on closing of the transaction with Fiat and additional payments will be payable on each of the next three anniversaries of the initial payment. Chrysler Group expects to fund the initial contribution to the VEBA Trust from available cash on hand.

''I have been looking forward to this day from the very moment that we were chosen to assist in the rebuilding of a vibrant Chrysler back in 2009'' said John Elkann, chairman of Fiat. ''The work, commitment and achievement I have witnessed from Chrysler over the past four and a half years is nothing short of exceptional, and I take this opportunity to officially welcome each and every one of the people in the Chrysler organisation to the integrated Fiat-Chrysler world.''

Sergio Marchionne, chief executive of Fiat and chairman and CEO of Chrysler Group, said: ''In the life of every major organisation and its people, there are defining moments that go down in the history books. For Fiat and Chrysler, the agreement just reached with the VEBA is clearly one of those moments. I will be forever grateful to the leadership team for the support and unwavering dedication shown to the integration project that today has taken its final shape. The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how, a solid and open organisation that will ensure all employees a challenging and rewarding environment.''

As part of the transaction, FNA and the VEBA Trust will agree to dismiss with prejudice the current proceedings before the Delaware Court of Chancery with respect to the interpretation of the call option agreement pursuant to which Fiat has, through FNA, exercised three tranches of a call option to acquire membership interests in Chrysler Group held by the VEBA Trust.

Fiat originally took a 20 per cent stake in the third largest US automaker as part of the company`s bankruptcy in 2009, after the German automaker Daimler failed to turn around Chrysler.

While the two largest US car companies General Motors and Chrysler were facing bankruptcy, GM got a massive dose of government financing, but the Obama administration decided that Chrysler was in too much trouble to help.

It decided to allow Fiat to get involved and bring to struggling Chrysler its technical know-how.

Chrysler sales are now booming after decades of turbulence and decline and it was Chrysler`s profits that have been keeping Fiat in good health amidst a deep downturn in Europe.

The Fiat-Chrysler brands include Alfa Romeo, Lancia, Abarth, Jeep, Dodge and Ram.