Fiat is negotiating with a series of banks to borrow as much as $10 billion to buy the Chrysler Group stake it doesn’t own and refinance both automakers’ debt at lower rates.
According to a report from Bloomberg, which cited people familiar with the matter, Fiat wants to buy the 41.5 percent of Chrysler held by the United Auto Workers’ retiree health-care trust with money borrowed from banks including Bank of America, Deutsche Bank, Goldman Sachs and BNP Paribas.
Fiat and Chrysler CEO Sergio Marchionne is trying to merge the two regional automakers into one global carmaker in order to compete with the Toyota, GM and VW automotive groups. A Fiat-Chrysler company would have the mass-market Fiat, Chrysler, Jeep and Dodge brands, along with the Maserati and Ferrari high-end marques.
According to the unnamed sources, Fiat aims to complete the purchase of the remaining stake by the end of the summer. However, Fiat will not make a move until the settlement of the legal dispute with the health-care trust over the value of its Chrysler stake, Fiat chairman John Elkann said.
Fiat may pay as much as $3.5 billion for the rest of Chrysler, according to an estimate from UBS, with the rest of the money to be used for paying the two carmakers’ net industrial debt, which was €7.1 billion at the end of March.
As for the merger, one option being considered is to create a new company in the U.S., merge Fiat and Chrysler into it and issue shares in the combined entity. Current Fiat owners would exchange their shares for a stake in the new company. This scheme would leave Exor Spa, the investment vehicle that holds the founding Agnelli family’s 30 percent Fiat stake, a minority holding in the merged company.
By Dan Mihalascu
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