Glass Lewis says “Yes” vote on Fiat-Chrysler merger brings benefits

Article by Andrew Christian, on July 30, 2014

Glass Lewis is recommending that Fiat investors vote “Yes” to a merger between the Italian carmaker and Chrysler Group at a meeting on Aug. 1. While a “Yes” vote would literally increase the voting power for main shareholder Exor, the proxy advisor said benefits outweighs those concerns.

Such advice from Glass Lewis and other large proxy advisors are usually taken into heart by international investors – making their voice an important factor in determining whether Fiat could get the two-thirds majority needed for approval of the merger.

In contrast, proxy advisors ISS and Frontis Governance have recommended a “No” vote, saying it would decrease shareholder rights and allow Exor to tighten its control of the carmaker.

But for Glass Lewis, such concern should be countered by bigger benefits to shareholders. "The proposed reincorporation is, on balance, in the best interests of shareholders as the benefits of access to deeper and more robust capital markets and improved governance standards outweigh our concerns regarding the potential increase in Exor's voting power," Glass Lewis said.

While Exor owns a 30-percent stake in Fiat Chrysler, its voting power could increase to up to 46 percent via a loyalty scheme established as part of the merger to reward long-term investors.

Should shareholders vote “No” against the merger, such event could derail or complicate Fiat Chrysler’s plans to list in the United States and obtain funds for its five-year business plan.

The merged FCA is seen to be based in London and have its tax domicile in the United Kingdom. Fiat-Chrysler chief executive Sergio Marchionne recently expressed confidence that shareholders would approve the merger. [source: Reuters]

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