Fiat inks deal to buy an extra 16 pecent stake in Chrysler, for a total of 46%

Article by Christian A., on April 20, 2011

Italy-based Fiat S.p.A. has inked an agreement with U.S.-based Chrysler Group LLC and its shareholders to exercise an option to purchase another 16 percent stake in the second quarter for this year, the Italian carmaker disclosed on Tuesday. Under the deal, which has been faster than expected, Fiat will pay $1.27 billion for the additional stake in the U.S. carmaker.

Previously, three sources who are familiar with the matter disclosed last week that Fiat has been searching for financial sources to pay approximately $1.5 billion for the stake and would be finalized in the coming months.

The Italian carmaker can purchase the additional 16 percent after Chrysler repays government loans, giving Fiat a 51 percent control on the U.S. company.

When Chrysler emerged from bankruptcy in 2009, Fiat had an agreement with the government of the U.S. to share management and technology in exchange for a 20 percent initial stake as well as performance targets to increase to 35 percent without paying any cash.

Last week, the U.S. government gave Fiat an additional 5 percent stake in Chrysler by reaching goals that were included in Fiat executing franchise deals with 90 of its dealers in Latin America to carry Chrysler products. Chrysler is targeting to finalize its debt refinancing in the second quarter, Fiat disclosed today.

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