European automobile giant Fiat is eyeing to buyout VEBA’s (Voluntary Employee Beneficiary Association) shareholding in America’s iconic car making company – Chrysler. Fiat accelerated talks with banks to fast track the financing process in order to acquire VEBA’s 41.5% shareholding in Chrysler. Fiat aims to raise roughly 3 billion Euros (Rs. 21,000 crores) through IPO, and the deal is expected to come at a closure by the end of July, according to sources.
If Fiat, headed by CEO Sergio Marchionne is successfully amalgamated with the all American Chrysler; it would lead to the creation of world’s seventh largest auto cartel. While a US court is still to release fact full information upon the actual worth of Chrysler, which happens to be a matter of disagreement between Fiat and VEBA, Marchionne claims that Fiat has enough cash to carry out the purchase itself but later came out saying that Fiat may need to raise as much as 2.5-3 billion Euros (Rs. 2500-3000 crores) to carry out the purchase positively.
As of December 31, Fiat is estimated to have a cash stockpile of about 9 billion Euros (Rs. 63,000 crores) , while VEBA 41.5% cash reservoir is speculated to be around a round figure of 3.5-4 billion Euros (Rs. 24,500-28,000 crores). The deal is being identified as a “dual-track deal” under which either the flotation of Chrysler shares owned by VEBA or an agreed purchase of VEBA’S holdings by Fiat will take place. A market (IPO) listing is also not out of question if the two automakers do not reach a successful pact said Marchionne.
The Legal Debate – The court issue which holds the final fate of the deal is that – what price Fiat should pay to acquire VEBA’s stake in Chrysler which is subjected to a call option. Meanwhile both companies are also in arms in order to figure out a 2009 deal which gives Fiat the liberty to purchase the holdings in five stages from VEBA. An out of the court border purchase deal is also speculated.
