Fiat Falls on Speculation Chrysler Merger Prompts Investor Exits

Aug 05, 2014 10:48 am ET

Aug. 5 (Bloomberg) -- Fiat SpA fell to a seven-month low amid investor speculation that the Italian carmaker’s merger with its Chrysler unit is at risk as stake sales by shareholders opposing the deal may exceed what the company is willing to pay.

Fiat plummeted as much as 7.2 percent to 6.56 euros, the lowest intraday price since Jan. 8, and was trading down 3.5 percent as of 4:45 p.m. in Milan. Volume was 1.7 times the three-month daily average. The decline pared the stock’s gain this year to 15 percent, valuing the Turin-based manufacturer at 8.52 billion euros ($11.4 billion).

Shareholders at a special meeting on Aug. 1 approved the merger of Fiat with Chrysler to create a new entity, Fiat Chrysler Automobiles NV, based in London and with its main stock trading in New York. Investors who wish to exit the company will be paid 7.727 euros a share. Chief Executive Officer Sergio Marchionne said before the meeting that buyout costs exceeding 500 million euros may make the deal ineffective.

“We believe the selloff is based on a misunderstanding regarding the merger,” including an assumption that all investors opposing the transaction will seek a buyout and put the cost cap in range, George Galliers, an analyst at International Strategy & Investment in London, said in an e- mail. “Just because a voter has voted against the merger, it does not mean that they will execute their cash exit rights.”

Fiat is “aware of certain market rumors suggesting that it has received a significant volume of notices to exercise the cash exit rights,” tied to the merger, the carmaker said in a statement. “These rumors are groundless.”

--With assistance from Francesca Cinelli in Milan.