With the creditor banks' loan conversion looming, the Agnelli's have announced that they are to spend 535 million euros buying Fiat stock in order to keep their controlling interest firmly intact.

As matters stood, the conversion of the 3 billion euro loan into Fiat Group shares would have seen the banks new week gaining a shareholding of around 27 pct, while the Agnelli family would have seen their biggest shareholder status swept away as their own stake diluted from 30 pct down to 23 pct.

Through their IFIL investment vehicle, the Agnelli family will now buy a block of 82.3 million shares, priced at 6.5 euros each - a significant discount to the current market price - which will allow them to continue retain their 30 pct controlling stake. Under the terms of  a complicated deal IFIL will purchase the shares from the Exor Group, an Agnelli family-controlled, Luxembourg-registered, financial holding company, that will in turn obtain the shares through an equity swap with giant US stockbroking house, Merrill Lynch. Thus the Agnellis have once more reaffirmed their historic role of calling the shots at Fiat, committing themselves for the longer term - and handing a welcome boost to the strategies of Fiat's Chairman Luca di Montezemolo, and CEO Sergio Marchionne. "We should not let go of a turnaround situation and not let others take the benefits of the turnaround," Gianluigi Gabetti - the Chairman of IFIL said late last week. "We will continue in our role of shareholders of reference.''
 

Also, this week IFIL's Managing Director John Winteler announced that, between 7th and 9th September, the Italian firm had bought an additional 5.5 million shares for a total price paid of 41 million euros. "That was a good price at the right time, we're buying at a significant discount from the share conversion," Winteler said.

700 MILLION EURO BOOST TO THE FIAT COFFERS

Meanwhile, Fiat will receive a useful net gain of 700 million euros when the banks shortly convert their 2002 loan into equity. The Fiat Group's board recently met and approved the conversion, which was initially agreed back in April. It had been expected that Fiat CEO Sergio Marchionne would attempt to renegotiate the 3 billion euro debt, but anxious to reduced group indebtedness he left the banks with no option but to convert their loan to stock.

The conversion kicked in on 13th September, and on 20th September it will issue 291.8 million new shares at a price of 10.28 euros, over three euros above its price this week. The Group's net debt will then fall to 4.4 billion euros (with several other recent asset disposals taken into account). Just two months ago debt levels stood at over 9 billion euros.