Bloomberg News

Fiat Said to Target N.Y. Primary Listing in Italy Retreat (1)

April 25, 2013

Fiat CEO Sergio Marchionne

Sergio Marchionne, chief executive officer of Fiat SpA, who also runs Chrysler Group LLC, plans to combine the two manufacturers to forge a global automaking group to challenge General Motors Co. and Volkswagen AG. Photographer: Alessia Pierdomenico/Bloomberg

Fiat SpA (F), Italy’s biggest manufacturer, may retreat further from its heritage by selecting New York as the primary exchange for its stock after a planned merger with Chrysler Group LLC.

Chief Executive Officer Sergio Marchionne is evaluating the Turin-based company’s switch from Milan, reflecting the carmaker’s shift to the U.S. for most of its profit and revenue, said four people familiar with the matter, who asked not to be identified because the talks are private. A Fiat representative declined to comment.

The executive, who runs both Fiat and Chrysler, plans to combine the two manufacturers to forge a global automaking group to challenge General Motors Co. (GM:US) and Volkswagen AG. (VOW) Fiat is looking to buy the rest of Chrysler after accumulating a 58.5 percent stake since taking control in 2009 as the U.S. company emerged from bankruptcy.

Fiat may keep Milan as a secondary listing, another person said. While no final decision has been made and other possibilities have been considered, the move would be highly political and symbolic for debt-ridden Italy as it struggles to emerge from a humbling cycle of recessions.

Fiat gained as much as 18 cents, or 3.9 percent, to 4.81 euros, the highest since Jan. 22, and was up 3.3 percent as of 9:58 a.m. in Milan trading. The stock has climbed 26 percent this year, valuing the company at 5.97 billion euros ($7.78 billion).

Italian Influence

Fiat is a key part of Italy’s commercial fabric. Its name is an acronym for Fabbrica Italiana Automobili Torino, or Italian Car Factory of Turin. The company, pushed by the Agnelli industrial family, played a significant role in Italy’s emergence as a manufacturing power after World War II.

“Italy and Turin should understand that the old Fiat, as we knew it, doesn’t exist anymore,” said Giuseppe Berta, a Fiat historian and business professor at Milan’s Bocconi University. “The carmaker now has the U.S. as its biggest market, so I would be surprised if Marchionne doesn’t choose the New York Stock Exchange.”

The Auburn Hills, Michigan-based company has become the group’s cash machine as Fiat struggles to end losses in Europe, which totaled more than 700 million euros last year. Fiat generated 75 percent of 2012 operating profit in North America.

Six out of nine Fiat’s analysts surveyed by Bloomberg News expect the combined company to be listed in the U.S., where it may have better access to capital.

Court Dispute

“It makes a lot of sense for Marchionne to list Fiat- Chrysler in the U.S.,” said Erich Hauser, an analyst for Credit Suisse in London. “Refinancing costs are typically lower and aren’t so much subject to the funding costs of sovereign bonds.”

Before the listing decision can be finalized, Fiat first has to buy the remaining 41.5 stake owned in Chrysler from United Auto Workers retiree health-care fund, or VEBA. The two sides are in court disputing the price for part of the shares that Fiat is seeking to buy under options held by the Italian company.

Marchionne expects a Delaware court to decide on the issue by the end of June. A hearing is scheduled today at the Delaware Chancery Court in Wilmington, where lawyers will argue their case for the valuation of the shares in the options.

The resolution of the court case would help provide “clarity” on the merger by the end of the year, the CEO said earlier this month.

New Stock

While Fiat says it doesn’t need to raise money to buy the Chrysler stake, a combined NY-listed stock could help Marchionne with his plan to shore up the group’s capital “in the medium to long term” by issuing new shares alongside the listing.

“Marchionne may offer to pay the VEBA for their holding partly with cash and the rest with stock of a new company,” said Michael Tyndall, an analyst at Barclays in London. “This would be formed by merging Fiat and Chrysler and would have a primary listing in New York.”

Financing talks with banks on Chrysler are under way and Fiat may get additional loans from banks to buy the holding, two of the people said. The Italian carmaker is approaching banks to refinance a 1.95 billion euro credit line before the deal, people familiar with the matter said last month.

Marchionne, 60, who grew up in Canada, has said the U.S. is an option to improve access to investors. Fiat “should somehow look at the U.S. market for its possible benefits,” he said March 19 in Geneva when asked if he would move the main listing of the combined entity to the U.S.

Fiat Industrial

“Fiat has opened itself up fundamentally and irreversibly to the outside world,” he told investors at the April 9 annual general meeting.

The Agnelli family, which still controls Fiat through its holding company Exor SpA (EXO), has already agreed to move Fiat Industrial (FI)’s headquarters outside Italy after a combination with its CNH division. The capital goods company that Fiat spun off in 2011 is planning to merge with its farm-equipment division CNH Global NV (CNH:US) and use CNH’s listing in NY for the combined entity.

“Our heart and our head are in the many regions where we operate,” John Elkann, Exor chairman and head of the family, told reporters in Milan this month, when asked if Fiat will keep its headquarters in Turin after the merger with Chrysler.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; David Welch in New York at dwelch12@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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