UAW trust pushing for possible Chrysler IPO

Article by Christian Andrei, on January 11, 2013

Chrysler Group said that it will comply with the demand by a minority shareholder for a registration for its holdings as a step towards a possible public stock offering. The UAW Retiree Medical Benefits Trust, which owns 41.5% of the automaker, made the demand. Chrysler is majority owned by Fiat S.p.A. The company said that the trust, a VEBA or a voluntary employee beneficiary association, hopes to register 16.6% of the shares in Chrysler.

Chrysler released a statement to indicate that registration is a first step in getting ready to sell those interests via a public offering of stock. Chrysler Group will do its best to register those shares as requested but it clarified that registration is not an assurance there will be an IPO. Sergio Marchionne, the CEO of both Fiat and Chrysler, wants a merger of its two companies by 2015 after having entered an initial alliance through the U.S. automaker's bankruptcy over three years ago.

Fiat, which struggles because of the decline of the European auto market, is faced with limitations in getting access to Chrysler's cash as part of conditions established by the U.S. government's rescue. Fiat owns 58.5% of Chrysler.

Fiat is locked in a legal dispute with the UAW trust over the price it needs to pay to exercise an initial call option that will increase its ownership stake to nearly 62%. In a November court filing, the UAW trust said that it's owed $342 million.

Fiat had earlier said that the shares are worth $139.7 million. On Jan. 3, Fiat said that it aims to exercise a second call option that would boost its stake to around 65%.

Richard Hilgert, an analyst for Morningstar Equity Research in Chicago, said that this will give a “clearer price” of what Fiat will have to pay to acquire the shares left beyond the call options. He added that it’s more likely that Fiat will eventually buy the shares before it goes to an IPO. VEBA then gets some negotiating leverage to say that this is what the market would pay for this portion of stock right now.

Topics: uaw, chrysler, ipo

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