Fiat has edged its ownership of the Chrysler Group yet
another notch higher after acquiring the 1.5 percent
stake held by the Canadian government, at a cost of
US$125 million, as well as the 6 percent belonging to the
United States Treasury (UST), for a price of US$500
million.
Both
these stake percent amounts are fully diluted figures,
taking into account the third "Ecological Event" - the
building of a 40 mpg capable car for the North American market -
which will trigger the release another 5 percent stake in the
Chrysler Group for Fiat. Thus the current value of the
Canadian government's stake, prior to the final 5
percent increment, is equal to
1.624 percent which will then be
diluted to 1.508 percent. The UST stake is fully diluted
as well, and so prior to the 5 percent increment
being completed it is worth 6.495 percent and this will
be diluted to 6.031 percent upon the showroom arrival
later this year of the 40 mpg capable car.
The UST has
also assigned to Fiat its rights
under the "Equity Recapture Agreement" entered into
between UST and the union healthcare trust, VEBA, when
the Chrysler Group emerged from the Chapter 11 procedure
two years ago, in exchange for
US$75 million, of which US$15 million was paid to Canada
through an agreement between the UST and Canada.
Explaining the
details of this transaction, the Fiat statement notes:
"Under the Equity Recapture Agreement, the holder is
entitled to 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) and any
proceeds to VEBA from its Chrysler membership interests
that exceed the specified threshold are to be paid over
to the holder along with any membership interests
retained at the time in excess of that threshold and the
holder may terminate the Equity Recapture Agreement by
purchasing the membership interests retained by VEBA at
a price equal to the then-current specified threshold
less any proceeds previously received by VEBA from its
membership interests in Chrysler. The rights under the
Equity Recapture Agreement do not affect Fiat’s rights
under the VEBA Call Option."
After these
transactions are taken into account Fiat holds a 53.5
percent (fully diluted) equity stake in Chrysler Group. Following the
arrival of the 40 mpg car, which the statement confirms,
"is expected
later this year", Fiat will have a 58.5 percent stake. Fiat
also has the option to purchase 40 percent of VEBA’s
stake in Chrysler which can be exercised from July 1,
2012 until June 30, 2016, in smaller chunks every six
months.
