By the end of this week Chrysler will file documents which will allow its minority shareholder , VEBA, to sell shares in a stock market listing.
Selling Chrysler shares will bring to a head the battle with Italian automaker Fiat, Chrysler’s majority owner, which plants to acquire the entire company. Fiat plans to acquire the 41.5% owned by VEBA, the healthcare trust affiliated to the UAW union, and secure access to the technology and cash flow the Italian car maker needs to become a tougher competitor.
As VEBA does not accept the price offered by Fiat, it hopes that a listing will get a higher price from investors or force Fiat’s hand to offer more. Fiat currently owns 58.5% of the US automaker and it hopes that the stock market valuation of the shares will prove that the existing offer would be the best option for VEBA.
“It’s in the interest of both parties, but of Fiat in particular, to reach an agreement before a Chrysler IPO,” said ICBPI analyst Luca Arena.
At the end of last week Fiat’s shares dropped 0.3% to 6.13 euro, after the automaker’s CEO Sergio Marchionne said that a deal with VEBA was further away than he expected. The Financial Times newspaper published a report today, 16th September, according to which Chrysler plans to file documents with regulators for IPO this week, earlier than predicted.
“We need to go trough this process of determining value,” Marchionne said. “(VEBA) have been very clear that they are not long-term holders of the assets. They want to monetize so we need to find a way that … does not create what I consider to be exceptionally high or abnormal expectations of value.”