Sergio MarchionneEnlarge Photo
Fiat is ringing in the new year by agreeing to buy the remaining 41.46 percent stake in Chrysler that it doesn't own from the United Auto Workers VEBA Trust, in a deal valued at approximately $4.35 billion. So far only a Memorandum of Understanding has been signed and the deal is still subject to due diligence and independent review. However, Fiat expects the process to be completed on or before January 20, 2014.
As part of the deal, VEBA will receive $3.65 billion up front, $1.75 billion of which will come from Fiat and the remaining $1.9 billion from Chrysler (Chrysler's operations are much more profitable than that of Fiat, which is still struggling in its home market of Europe). In addition to this, Chrysler will inject an additional $700 million to the fund over the next four years. The deal puts Chrysler’s value at approximately $10.5 billion when you factor in the value of the shares already owned by Fiat.
The value is less than what most analysts predicted but it does provide benefits for both. The deal means Chrysler will avoid having to launch an Initial Public Offering and will finally be able to fully merge with Fiat, allowing the two to pool cash reserves and further integrate future model development.
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"The unified ownership structure will now allow us to fully execute our vision of creating a global automaker," the CEO of both automakers Sergio Marchionne said in a statement.
This brings an end to a saga that started back in 2009 when Fiat agreed to take on a 20 percent stake of Chrysler, which needed to be bailed out by the government after declaring bankruptcy that same year.