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Fiat announces postponement of Chrysler IPO

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November 25
9:59 AM 2013

In an announcement made today, Italian automaker Fiat SpA said Chrysler Group LLC will not proceed with an initial public offering this year. Fiat is the majority owner of the American automaker. The decision was made after Chrysler's board of directors had a discussion with Chrysler's underwriters.

Fiat said in the statement, "No assurance can be given as to whether or when an offering will be launched. Any launch will be subject to market conditions and other relevant considerations."

However, Fiat's statement indicated that a share sale would be happening next year, and that preparations will still continue in the first quarter of 2014.

Plans for a share sale of Chrysler was born from a dispute between Fiat and a United Auto Workers Retiree Medical Benefits Trust over the value of the latter's shares in Chrysler. Fiat was to fully acquire Chrysler and then launch an IPO. However, the merger was stalled by the trust over the valuation of a portion of UAW's stake in Chrysler. Based on Fiat's and the trust's calculations, the shares in question could be worth some USD1.74 billion to US4.27 billion, said a Wall Street Journal report. The UAW trust owns 41.5% of Chrysler.

Chief Executive Sergio Marchionne had grandiose plans for Fiat since becoming chief of the company around ten years ago. The acquisition of Chrysler, on the other hand, was a way out for the US company to file for bankruptcy and turn over its control to Fiat.

UBS analyst Philippe Houchois, who is based in London, said, "You create a business that on a pro forma basis looks more like Ford [Motor Co.], than Renault-Nissan [alliance]. If you look at the structure now, you've got a good child with a problem parent, so it's potentially life-threatening. If you flip it around and Fiat becomes a division of Chrysler, it becomes easier to deal with."

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