It's official, Fiat now controls the Chrysler Group
after agreeing to buy the U.S. Treasury Department's 6
percent stake for US$500 million following the
exercising its option; this development edges its
shareholding up to 52 percent.
From
an initial 20 percent of equity that Fiat was handed
when the Chrysler Group emerged from the bruising
Chapter 11 bankruptcy process in 2009, the Italian
carmaker has steadily edged its way to 52 percent, to
take operational control, and with a range of further
options to increase that stake upwards still available
to it.
In s statement issued in Turin, Fiat said: "Fiat and the
United States Department of Treasury (UST) have agreed
today that Fiat will pay US$500 million to purchase the
6 percent UST’s ownership interest in Chrysler Group
LLC, following Fiat’s notice of exercise for the UST
Call Option on May 27, 2011."
The statement
also noted that Fiat is paying a further US$75 million
to the UST to take over its option to buy the stake held
by the VEBA trust on behalf of the union's healthcare
fund. "In addition, the UST has agreed to assign to Fiat
all of the UST’s rights under the Equity Recapture
Agreement entered into between UST and VEBA on June 10,
2009, for a price of US$75 million," said Fiat.
"Under the
Equity Recapture Agreement, the holder retains the
economic benefits associated with the Chrysler ownership
interests held by VEBA above a specified threshold
(equal to $4.25 billion plus 9 percent per annum
compounded annually from January 1, 2010)," noted the
press release. "Under the Equity Recapture Agreement,
any proceeds to VEBA from its Chrysler membership
interests that exceed the specified threshold are paid
over to the holder along with any membership interests
retained at the time in excess of that threshold. In
addition, the holder has a right to purchase all of the
membership interests retained by VEBA for a purchase
price equal to the specified threshold less any proceeds
previously received by VEBA from its membership
interests in Chrysler."
Fiat also
stated that: "Both transactions will be consummated upon
receipt of the requisite regulatory approvals." Later
this year Fiat will also gain a further 5 percent stake
in the Chrysler Group when it introduces a fuel
efficient (40 mpg) model.
"On behalf of my family and I,"
commented Fiat’s Chairman, John Elkann, "I reiterate our
confidence in Sergio Marchionne and his leadership team
and our support of all the people at Fiat and Chrysler
who are working with dedication and humility and have
made it possible to repay the trust that the U.S.
government demonstrated towards us a mere 23 months ago.
We will continue to support them as they further
strengthen this historic alliance and together build an
international automotive group capable of competing with
the very best in the automotive market."
