MILAN: Sergio Marchionne has shown he is determined to let nothing stand in the way of Fiat’s merger with Chrysler, but a share price slide may yet force the CEO to hit the brakes on plans to turn the world’s No. 7 carmaker into a top player.
Fiat bought out Chrysler at the start of 2014 and both operate as one firm. Marchionne now plans to merge them into a single legal entity Fiat Chrysler Automobiles (FCA) to boost the firm’s global clout and pave the way for a US listing he says is key to help fund a ¤48bn ($64bn) growth plan.
However, his plan looks to be on shaky ground. The merger cannot go ahead if too many shareholders who disagree with it take up his formal offer to buy their stock at a set price — a legal requirement triggered by Fiat moving its registered offices from Italy to the Netherlands — and recent events make that a possibility.
On top of concerns that Marchionne may be overreaching with his investment plan —to grow net profit five-fold and sales by 60 percent by 2018 — Fiat’s recent poor results and weak markets prompted a slide in its shares to their lowest this year and below the ¤7.727 price that Marchionne is offering investors who want to depart when the merger occurs.
Should investors holding around nine percent of eligible shares decide to sell, that would breach a ¤500m payout limit that Fiat has set — and throw the merger into doubt. Fiat would have an opportunity to place the tendered stock to other shareholders and later to the public at the same exit price, an unlikely prospect while the market value remains lower.
“With the share price where it is today, a delay is a possibility,” said Andrea Giuricin, a transport analyst at Milan’s Bicocca university. “If there is a delay, it would impact Fiat’s plans to lure foreign investors and ease its access to cash.”
Reuters
