Sergio Marchionne is throwing in the towel in his fight against a union health care trust to keep Chrysler Group LLC off the stock market until Fiat SpA (BIT:F) is merged with the Michigan-based car company.
The CEO of Fiat and Chrysler told the Financial Times in a report published late Sunday that papers would be filed with the U.S. Securities and Exchange Commission (SEC) this week for an initial public offering that could take place any time after the SEC responds but is more likely to take place in the first quarter of next year.
Marchionne wants to merge Fiat and Chrysler to streamline both companies and access Chrysler’s cash to help the Italian car company, which has been struggling with the European sovereign debt crisis. But standing in the way is how much the United Automobile Workers (UAW) Retiree Medical Benefits Trust, the world’s largest voluntary employees' beneficiary association, wants for its 41.5 percent stake of Chrysler. In January, the trust exercised its legal right to demand Fiat publicly list 16.6 percent of Chrysler.
A merger would put Italian marques Ferrari and Maserati under the same company that makes U.S. brands Ram trucks and Jeeps.
The trust maintains that Chrysler is worth $10.3 billion, which would make its stake worth about $4.3 billion. But Fiat says Chrysler is worth much less – $4.2 billion – which would make the trust’s stake worth about $1.7 billion. This $2.6 billion difference between these two valuations has been the crux of the dispute that has prevented Fiat from taking full control over Chrysler.
Continue Reading Below
“[The trust] have been very clear that they are not long-term holders of the assets,” Marchionne told the Financial Times from Fiat’s headquarters in Turin, Italy. “They want to monetize, so we need to find a way for them to exit in a way that . . . does not create what I consider to be exceptionally high or abnormally expectations of value. The market will tell us. Let the market talk.”
Chrysler went through bankruptcy in 2009 amid the auto sector crisis caused by the subprime mortgage meltdown, sticking the U.S. Treasury with a $1.9 billion obligation that will likely never be paid back. Fiat acquired a majority stake of the newly reorganized Chrysler sans its previous obligations while the UAW trust took the rest.