Fiat-chrysler merger a done deal
Marchionne gets remaining shares of U.S. automaker
NEW YORK — Sergio Marchionne’s five-year effort to merge Fiat SpA and Chrysler Group LLC culminated in a Florida beach town, where the workaholic chief executive officer spent hours nailing a deal that was announced New Year’s Day.
The 61-year-old Italian-born Canadian travelled to Vero Beach, Fla., for the decisive meeting with a United Auto Workers health-care trust on Dec. 28. There, Marchionne struck a deal to buy the 41.5 per cent stake in Chrysler held by the UAW trust. The agreement gives Fiat full control of the No. 3 U.S. carmaker, allowing it to better compete with the likes of General Motors Co. and Volkswagen AG.
The $4.35 billion deal marks a “historic moment for both Fiat and Chrysler,” Marchionne said in a joint letter to employees with Fiat chairman John Elkann. “The result has been the creation of a global automaker that is among the leaders in the sector.”
The agreement will cost the Turin-based company about a 10th the amount then Daimler-Benz AG paid for Chrysler 15 years ago. Chrysler will pick up much of the tab, protecting Fiat’s cash reserves and sending the Italian company’s stock up 16 per cent. The deal will allow Marchionne to pool Chrysler’s cash with Fiat’s and better integrate the Fiat, Alfa Romeo and Maserati brands with Chrysler, Jeep and Dodge.
“Marchionne clearly spent his Christmas holiday working harder than we did,” said Max Warburton, an analyst with Bernstein Research in Singapore. “The most surprising aspect of all is the source of funding — over 50 per cent of the upfront cash will come from Chrysler.”
Marchionne has made a combination of Fiat and Chrysler a personal mission. Since 2011, Fiat built up a 58.5 per cent holding, leaving the trust’s stake the last piece of the pie.
Being trusted with reviving an American icon is “something that happens to you once in a lifetime,” he said in his office in Turin.
When Marchionne took the helm of Fiat in 2004, the Italian company was on the brink of bankruptcy, having lost more than $8.2 billion from 2001 to 2003. He managed to return the company to profit in 2005.
While a merger with Chrysler would make Fiat the world’s seventh-largest carmaker, the combined company still needs a bigger presence in the growth markets of Asia and has to prove it can make money in Europe.
The final push for the Chrysler breakthrough started with Fiat making a revised offer to the union trust at a Detroit meeting on Dec. 19, according to four people familiar with the matter who requested not to be identified. The sides had been deadlocked for months, with the trust seeking at least $5 billion.
Fiat’s board in Turin then considered a counter bid from the trust, which had lowered its expectations on concerns that the U.S. auto market was peaking, one person said. With the two sides getting closer, Marchionne requested a meeting with the fund’s advisers, including Alain Lebec, senior managing director of Brock Capital LLC.
The trust and Marchionne, a selfdescribed corporate “fixer,” agreed to a price between the final two proposals at the Dec. 28 meeting that lasted roughly four hours past sunset. The next day, Fiat’s board approved the agreement and final details were worked out until the surprise announcement Jan. 1. The outcome means Fiat will fork out about $3.7 billion in cash for total control of Chrysler, helping it gain access to the resurgent American carmaker’s $12 billion in reserves to help fund a turnaround in Fiat’s unprofitable European business. The Italian company’s investment compares with the $36 billion Daimler paid for the company in 1998.
“Marchionne showed he’s a real maestro,” said Giuseppe Berta, a professor at Bocconi University in Milan who has written several books on Fiat. “Now the merger of Fiat and Chrysler is a done deal.” A time line for the combination may be outlined in late January, when Fiat’s board meets, said two people familiar with the situation.
“What Fiat has done in the last 10 years clearly bears Marchionne’s signature,” said Gianluca Spina, dean of Milan Polytechnic business school. “He managed to save the company from extinction and gave it an international exposure it didn’t have before.”