Bloomberg News

CNH Global Spurns $1.1 Billion Offer From Fiat Industrial

October 15, 2012

CNH Committee Rejects Parent Fiat Merger Bid as ‘Inadequate’

An employee at the Fiat SpA and Guangzhou Automobile Group Co. (GAC) manufacturing plant works near door panels for Viaggio vehicles in Changsha, Hunan Province, China. The decision sets back chairman Sergio Marchionne’s plans to merge Fiat Industrial with CNH and move the combined company’s primary listing to New York from Milan. Photographer: Nelson Ching/Bloomberg

CNH Global NV (CNH:US) rejected a buyout offer from parent Fiat Industrial SpA (FI) in a blow to Chairman Sergio Marchionne’s plan to move the truck and tractor maker’s primary listing to New York from Milan.

“We have unanimously concluded that the proposal is inadequate,” a CNH special committee evaluating the offer said in a statement today. Fiat Industrial, which owns (CNH:US) 88 percent of CNH, had been seeking to buy the remaining stake -- valued at $1.1 billion based on the stock’s latest closing price -- as part of a proposal made in May.

Marchionne, who’s targeted 25 billion euros ($32 billion) in sales for Fiat Industrial this year, is seeking to create the world’s third-largest capital-goods company in the combination. The merged entity would have a product range spanning Iveco delivery trucks, New Holland harvesters and FPT ship engines.

“The news is negative as the deal is at risk,” Massimo Vecchio, a Mediobanca analyst in Milan, wrote today in a note to clients. “In the best case it will be significantly delayed and executed with worse terms.”

CNH rose as much as 97 cents, or 2.4 percent, to $41.23 and was up 2.3 percent as of 12:34 p.m. in New York trading. The stock has gained 14 percent this year, valuing the American company at $9.88 billion. Fiat Industrial fell 3 cents, or 0.3 percent, to 7.81 euros at the close of trading in Milan.

Moving Forward

Fiat Industrial proposed May 30 that a new company be created in a share exchange with no premium for CNH shareholders. A recommendation from the committee was a prerequisite for the deal, according to today’s statement. The CNH committee remains available to consider alternatives should Fiat Industrial amend its bid, it said. JPMorgan Chase & Co. (JPM:US) and Lazard Ltd. (LAZ:US) advised the committee.

The Italian manufacturer still wants to go ahead with the combination, it said today in a statement. Fiat Industrial has asked its advisors to meet with CNH to determine “the basis for this decision and explore whether the parties can reach agreement on revised terms for a merger transaction on a basis broadly consistent with the initial proposal,” it said.

Fiat Industrial “remains committed to the strategic and financial benefits of the merger,” Marchionne said today in the statement. Fiat Industrial said it aims to reach a new agreement with CNH within the next several weeks.

Debt Crisis

Marchionne said Oct. 12 the merger wouldn’t go ahead this year as planned because the European debt crisis had complicated CNH’s special committee evaluation. While the European crisis has made an evaluation of the companies more difficult, the delay won’t change the terms of the deal, he said last week.

Fiat Industrial, spun off from carmaker Fiat SpA (F) last year, is reorganizing in response to the debt crisis in Europe. Its Iveco truck unit announced plans on July 1 to shut five plants in Europe by the end of 2012 because of the sovereign-debt crisis in the region.

The rejection of the offer, which was viewed by analysts and investors as a precursor to a similar move by Fiat, may delay Marchionne’s plan to merge the Italian carmaker with Chrysler Group LLC.

“The difficulties in changing the structure at Fiat Industrial probably also dampens the hopes of Fiat SpA bulls that we will see a similar transaction happen at Chrysler,” said David Arnold, a Credit Suisse analyst in London.

Fiat, which owns 58.5 percent of the U.S. automaker, aims to merge the two carmakers to boost revenue to more than 100 billion euros in 2014. Marchionne hasn’t disclosed yet where the combined entity will be listed and based.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net


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