|Fiat takes Chrysler public, deal details under wraps
US automaker Chrysler filed papers for an initial public stock offering after Italian parent Fiat failed to reach a deal to purchase a workers retirement fund's large stake.
Sergio Marchionne, who leads both Chrysler and Fiat, had repeatedly said he hoped to avoid an IPO as he sought full ownership of the third largest US automaker.
But the UAW Retiree Medical Benefits Trust – known as the VEBA Trust – has demanded a stock offering in hopes of getting a better payout.
The papers filed Monday may not necessarily result in an actual stock offering if the two sides are able to reach a deal before the shares are sold. If they do, it will be the first time Chrysler shares would be traded since its failed 1998 merger with Germany's Daimler Benz, AFP reports.
Chrysler said in a statement that the number of shares to be offered, and the price range for them, had yet to be determined.
“The VEBA Trust will receive all of the net proceeds from this offering,'' Chrysler said.
JP Morgan Securities was chosen as the lead book-running manager of the offering.
“The Chrysler IPO is a textbook example of the difficulties that can occur when debt is converted into an ownership stake, as it was during Chrysler's bankruptcy,'' said automotive analyst Jack Nerad of Kelly Blue Book.
“The trust is looking for a windfall based on the current expected value of a public-traded Chrysler, but the move may actually harm Chrysler's future and by extension harm current Chrysler workers.''
Fiat holds a 58.5 percent ownership stake in Chrysler, while the VEBA trust holds the remaining 41.5 percent. However, under the terms of a deal reached as part of a 2009 government-funded bankruptcy filing, the VEBA trust is obligated to sell a large portion of that stake directly to Fiat.
The potential IPO comes as Chrysler's sales are booming.
Chrysler's first big government bailout was in 1979 when legendary chief Lee Iacocca secured a loan guarantee.
Chrysler joined General Motors in seeking billions in aid from the US government and then restructuring under bankruptcy protection in 2009.
Fiat was able to win a 20 percent stake in Chrysler in exchange for sharing its technology and putting Marchionne at the helm.
Chrysler's profits grew 16 percent to US$507 million in the second quarter. Global vehicle sales were up 10 percent at 643,000.