Fiat ready to buy last stake in Chrysler

Fiat shares rose 5 per cent yesterday, bolstered by optimism about the Italian automaker’s ability to buy out the remaining 38.2 per cent in its US unit Chrysler, which would give it a bigger benefit from a booming US market.
By The Newsroom
Published 5th Jul 2012, 07:00 BST

Remarks by Fiat chief executive Sergio Marchionne late on Tuesday indicated that he was ready to pay cash for the remaining stake in Chrysler “at any time”.

He also indicated he could do it in 2015, in advance of a 2016 deadline for Fiat to incrementally buy up 16.6 per cent of Chrysler at a price tied to a market multiple.

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Completing its purchase of Chrysler would help Fiat’s share price, since it would give money-losing Fiat access to the “valuable cashflows of its American partner”, wrote Bernstein Research in a stock upgrade.

Mr Marchionne has said in the past that Fiat could pay cash for the remaining stake in Chrysler. He also said that he didn’t think the conditions were right to do it now. All the same, his remarks bolstered market sentiment.

“I think he rarely intensifies his communication without being ready to make a move,” said UBS automotive analyst Philippe Houschois.

Fiat moved to increase its hold on Chrysler on Tuesday, announcing, as expected, it bought around 3.3 per cent from Chrysler’s other shareholder, the union healthcare trust VEBA, or the Voluntary Employees Beneficiary Association, boosting its stake to 61.8 per cent.

Fiat holds options to purchase up to 40 per cent of the portion of Chrysler owned by VEBA. Fiat can purchase up to 3.32 per cent at a time in any six-month period until June 30, 2016.

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