Fiat could raise necessary cash in May that would allow it to buy the 41.5 percent of Chrysler shares it doesn’t own yet. According to two unnamed sources quoted by Reuters, the Italian carmaker is in advanced talks with banks on financing to buy the remaining 41.5 percent of Chrysler. These shares are held by VEBA, the United Auto Workers’ retirees’ healthcare trust. Fiat’s talks with banks are expected to end next month.
The Turin-based automaker is looking to raise around €3 billion ($4 billion) in new financing and is hoping to reach an agreement with VEBA by early July. Fiat’s CEO Sergio Marchionne wants to merge the two carmakers in order to create the world’s seventh-largest automobile manufacturer. The deal would also allow Fiat to use Chrysler’s cash flow to offset its losses in Europe.
According to analysts, VEBA’s 41.5 percent stake in Chrysler is worth an estimated $3.5-$4 billion. However, Chrysler’s price tag is the subject of a legal battle between Fiat and VEBA. Earlier this month Marchionne said the carmaker may need to raise €2.5-€3 billion ($3.3-$3.9 billion) in connection with the buyout. He did not get into details though.
Despite the fact that Fiat has cash reserves of about €9 billion ($11.91 billion) as of December 31, it would still need to raise finance to merge with Chrysler to maintain the new group’s credit rating.
Marchionne would like to merge the two automakers and avoid an IPO (Initial Public Offering), but he doesn’t rule out a market listing if Fiat and VEBA don’t reach a deal.
By Dan Mihalascu
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