Fiat Clears Chrysler-Merger Hurdle as Withdrawals Below Cap

Aug 29, 2014 3:18 am ET

(Updates with share price in sixth paragraph.)

Aug. 29 (Bloomberg) -- Fiat SpA will spend less than the limit the Italian carmaker set to buy shares from investors who opted to withdraw before it merges with Chrysler Group LLC, clearing a key hurdle before the deal can close.

Based on a preliminary tally, the total won’t be more than the 500 million euros ($658 million) Fiat allotted, the Turin- based company said today in a statement. Had the amount exceeded the company’s cap, the deal would have been delayed. The final sum of withdrawal rights will be announced by Sept. 4.

“I am delighted with these results,” Fiat Chairman John Elkann said in the statement. “We are now looking forward to the completion of this project.”

Fiat is combining with Chrysler to create what the company estimates is the world’s seventh-largest automaker as it seeks to better compete with heavyweights like General Motors Co., Volkswagen AG and Toyota Motor Corp. The new entity, Fiat Chrysler Automobiles NV, will be based in London and have its main stock listing in New York.

Fiat said the transaction is on track to close by the middle of October as planned. After shareholders approved the merger on Aug. 1, investors opposing the plan were allowed to the sell their stock to Fiat at 7.727 euros a share.

The Italian company’s stock rose as much as 3.5 percent and was up 2.5 percent at 7.63 euros at 9:16 a.m. in Milan trading.

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Earlier this month, the shares fell to their lowest level in 2014 on concerns that too many investors would demand cash, which would have forced Fiat to delay the combination until a new shareholder meeting takes place. The stock has traded below Fiat’s withdrawal price ever since the deal was approved.

Fiat said it recognized exit rights that were validly exercised. The process involved a written notification to the company by registered mail by Aug. 20, naming an intermediary where the shares were deposited. The intermediary then needed to certify in an e-mail to Fiat by Aug. 22 that the investor owned the stock prior to the Aug. 1 shareholders meeting.

Fiat now needs to wait for potential opposition from creditors. That period expires on Oct. 4, and the company said today it doesn’t expect this process to interfere with the closing of the deal.

“I am reassured by the fact that the vast majority of our equity holders have remained loyal and committed shareholders,” Chief Executive Officer Sergio Marchionne said in the statement. Investor support is “of crucial importance as we embark on the execution phase, which will dramatically improve the market positioning of our group.”

--With assistance from Sonia Sirletti in Milan.