Fiat Plans to Sell Withdrawal Shares With New York Listing

Aug 30, 2014 9:59 am ET

(Updates with CEO comment in last paragraph.)

Aug. 30 (Bloomberg) -- Fiat SpA will sell shares acquired from investors exiting the company before its merger with Chrysler Group LLC to raise funds and boost trading liquidity.

“Those are shares that I normally would not have repurchased, so they may be used to create liquidity” rather than add to debt, Chief Executive Officer Sergio Marchionne told Bloomberg News today at an event in Rimini, Italy.

The withdrawal shares will be sold as part of the listing of Fiat Chrysler Automobiles NV on the New York Stock Exchange, which may take place Oct. 13, he said. The merged company’s new board will then meet in late October and evaluate its capital structure, including weighing the possibility of issuing new shares.

Fiat’s merger with its U.S. unit will create the world’s seventh-largest automaker in an effort to better compete with heavyweights like General Motors Co., Volkswagen AG and Toyota Motor Corp. The project focuses on attracting customers with higher-priced Alfa Romeo sedans, Maserati sports cars and Jeep sport-utility vehicles.

Fiat, based in Turin, Italy, said yesterday that the merger is on track for completion by mid-October as the cost of buying out investors who withdraw before the deal is completed won’t exceed the 500 million-euro ($657 million) limit set by the company. The carmaker, which had said that it planned to cancel those shares, will announce the final tally of shares that will be purchased from cash-exit rights by Sept. 4.

The Italian company’s stock fell to the lowest level this year in early August amid concern that the payments would total more than the alloted figure and put the timing of the transaction at risk.

Backed by Chrysler’s growth, the manufacturer is targeting a profit increase of as much as 18 percent this year. Earnings before interest and taxes, and excluding one-time items, will range from 3.6 billion euros to 4 billion euros in 2014, compared with 3.39 billion euros last year, Fiat reiterated in late July. Marchionne said those targets were still valid to “the best of my knowledge.”

The U.S. market is doing “incredibly well” as you will “hopefully” see with the August sales numbers, he said. North American operations “continue to perform well and provide a lot of support for the activities of the group.”