Official: Fiat completed the acquisition of shares in Chrysler Group

Article by Christian A., on January 21, 2014

Fiat officially announced that it completed the acquisition of shares in Chrysler Group! This comes after the Italian company announced on January 1 that it struck a $4.35 billion deal to gain full control of Chrysler. For those who don’t know, Fiat bought the remaining 41.46 percent stake in Chrysler from a retiree healthcare trust affiliated with the UAW.

The trust is known as a voluntary employee beneficiary association of VEBA and has received $3.65 billion in cash for the stake. According to the press release, $1.9 billion came from Chrysler and $1.75 billion from Fiat. Moreover, Chrysler will give UAW trust another $700 million in four equal annual installments.

“Chrysler Group made the initial payment today contemporaneously with the closing of a transaction between a wholly-owned subsidiary of Fiat and the VEBA Trust in which Chrysler Group became a wholly owned subsidiary of Fiat. Additionally, Chrysler Group paid a special distribution to its members in an aggregate amount of $1,900 million.” said the press release.

Chrysler LLC filed for Chapter 11 bankruptcy in April 2009. In June that year, Chrysler LLC sold most of its assets to “New Chrysler", formally known as Chrysler Group LLC. Fiat initially owned 20 percent of Chrysler Group. Fiat continued to increase its stake in Chrysler until it finally owned 58.5 percent of Chrysler while the UAW retiree healthcare trust called Voluntary Employee Beneficiary Association (VEBA) holds the rest.

In September 2013, it came into light that Chrysler Group has submitted documents pertinent to an initial public offering, which is expected to determine the real value of the carmaker, thereby resolving a valuation row between Fiat and VEBA.

Chrysler Group had sought to hold an IPO in early December 2013. According to sources, plans were delayed due to complications involving the conversion of Chrysler from a limited liability company to a C corporation, and this might mean additional taxes. 
As a limited liability corporation, Chrysler has few shareholders with its owners bearing the losses and paying the taxes. Meanwhile, a C corporation pays its own taxes and has no limit on the number of shareholders. It also faces a greater tax burden.

The delay had been seen as hurdle in 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. While Marchionne had said he prefers not having to hold an IPO for Chrysler, he was forced to file IPO documents after failing to ink a buyout agreement with VEBA.

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Topics: fiat, chrysler, shares

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