Chrysler IPO postponed until 2014 over US tax issue

Article by Anita Panait, on November 27, 2013

Chrysler Group will not hold an initial public offering this year as it needs to deal with a tax issue first in the United States, two sources privy with the process told Reuters. One of the sources said that Chrysler has already notified underwriters of the decision. Fiat issued a statement saying that it would "not be practicable" to complete a Chrysler IPO this year.

Chrysler had sought to launch the share sale in early December. The sources disclosed that plans were delayed, no thanks to complications involving the conversion of Chrysler from a limited liability company to a C corporation. According to Peter Bible, chief risk officer of accounting firm EisnerAmper, most public companies are C corporations, and conversion to this structure might mean additional taxes.

Being a limited liability corporation, Chrysler has few shareholders with its owners bearing the losses and paying the taxes. On the other hand, a C corporation pays its own taxes. It also has no limit on the number of shareholders and faces a greater tax burden.

The delay could also hamper the efforts of chief executive Sergio Marchionne to buy out the minority shareholder at Chrysler and eventually merge it with Fiat to create a company that is large enough to compete with global carmakers.

A merged Fiat-Chrysler would be the seventh-largest carmaker in the world. While Marchionne said he prefers avoiding an IPO for Chrysler, he was forced to file IPO documents in late September after failing to strike a buyout agreement with the other Chrysler owner, the VEBA trust.

Topics: chrysler, ipo

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