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Chrysler files for IPO to move its merger deal with Fiat

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September 24
11:27 AM 2013

In what seems to be a final move to end the stalled merger of Fiat SpA and Chrysler Group LLC, Sergio Marchionne filed for an initial public offering on behalf of Chrysler. The IPO filing was to determine the market value of the US automaker. Marchionne is both Fiat's and Chrysler's chief executive officer.

University of Michigan Ross School of Business and Michigan Law School Erik Gordon said, "It's a game of chicken. If the IPO prices too low, the VEBA loses. If it prices higher than Marchionne wants to pay, he is cornered, and will end up paying a premium." According to the regulatory filing yesterday, VEBA, or the voluntary employees' beneficiary association, is the USD100 million offering by the trust that's being used to calculate the fees that could change.

The United Auto Workers retiree health-care trust was attributed as the cause of the stalled merger. The trust, who owned 41.5% of Chrysler, had wanted the market to determine the price of the US carmaker's shares. The trust failed to reach an agreement with Fiat about the market value of the trust's shares in Chrysler. Marchionne's Fiat was only offering at least USD1 billion less than what the trust had wanted for its holding. 

Marchionne is intent to purchase the entire stake of the UAW trust. Fiat has been looking to tap into Chrysler's cash reserves amounting to USD12 billion to help turn around the European automaker.

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