Fiat Chrysler Automobile is selling 87 million shares at $11 each as part of a plan by its chief executive to raise around $5 billion for cutting its debt and financing its ambitious industrial plan. Fiat Chrysler also disclosed the pricing of the $2.5 billion in convertible bonds due Dec. 15, 2016. Underwriter banks have the right to buy an additional 13 million shares and an extra $375 million of the convertibles.
Combined, the share sale and the bond issue will dilute Fiat's shares by 19 percent to 21 percent, according to Evercore ISI analyst Arndt Ellinghorst. FCA is planning to reduce its net industrial debt, which was EUR11.4 billion as of September 30, 2014.
Fiat Chrysler CEO Sergio Marchionne plans to complete the financing by Christmas and has met with US investors to encourage them to take part in the share and debt sale. Aside from the share sale and the issuance of convertible bonds, Marchionne is also planning to spin off FCA’s Ferrari unit in 2015.
FCA said in a filing last week that the financing will allow the newly merged carmaker to hike its cash holdings to almost EUR21 billion ($26 billion) from around EUR18 billion as of Sept. 30, adjusted for the October merger.
Those who bought the convertible bonds – which are mandatory – would be eligible to get a stake in Ferrari when FCA distributes 80 percent of its holdings in the super carmaker to its investors in 2015. The mandatory bonds will have a coupon rate of 7.875 percent and a conversion rate of between 7.7369 common shares and 9.0909 common shares per security converted.