VEBA prices its 3.3% stake in Chrysler at $342 million

Article by Anita Panait, on November 14, 2012

The Voluntary Employees Beneficiary Association (VEBA) wants Fiat to pay at least $342 million for the healthcare trust’s 3.3 percent stake in Chrysler Group LLC that the Italian carmaker wants to acquire. According to documents filed by VEBA in Delaware's Court of Chancery, the healthcare trust said that Fiat's offer of $139.7 million for the Chrysler stake was substantially below the fair market value.

Fiat, which holds a majority ownership in Chrysler, sued VEBA in September for its failure to sell the stake. As part of the 2009 agreement with the U.S. Treasury as Chrysler emerged from bankruptcy, Fiat could exercise call options to acquire portions of the stake held by VEBA, the healthcare trust for retired Chrysler workers member of the United Auto Workers union.

The increases could substantially increase Fiat’s stake in Chrysler from 58.5 percent to as much as 75 percent, paving the way for the Italian carmaker’s plans to eventually merge the two auto manufacturers. Fiat wants to acquire VEBA’s 3.3 percent stake for $139.7 million, which was reached by using a formula created when the Italian company took control of Chrysler as it came back from bankruptcy in 2009.

However, other Chrysler shareholders have objected to the price, resulting to a legal dispute in court. As the majority owner, Fiat already exercises control management control of Fiat. However, owning Chrysler would allow Fiat to restructure its debt and ensure that the US carmaker generates ample cash to support its bleeding operations in Europe, according to analysts

Topics: chrysler

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