Fiat exercises option to buy more Chrysler stock

Italian automaker Fiat has exercised a third option to buy a small amount of Chrysler stock, but the sale won't go through until a US court settles a dispute over the price.
Fiat said today that it offered USD 254.7 million for another 3.3 per cent of Chrysler's outstanding equity.
Fiat already owns 58.5 per cent of Chrysler, with the remaining 41.5 per cent held by a trust that pays medical bills for retired United Auto Workers union members. The Italian company wants to buy all of the trust's stock and fully merge Chrysler and Fiat.
The price on the options will be settled by a judge in Delaware Chancery Court, and the ruling is likely to set the price for the trust's remaining Chrysler stake. For several months, Fiat has been trying to arrange financing to buy the trust's stock. Fiat expects a court ruling sometime this month.

"I hope to close (the deal) as soon as possible if they let me do it," the Italian news agency LaPresse quoted Fiat and Chrysler CEO Sergio Marchionne as saying at an appearance Monday in Turin, Italy, Fiat's headquarters city.
Fiat now has exercised options to buy 9.9 per cent more Chrysler stock. The Italian automaker has options to buy 3.3 per cent of Chrysler stock every six months until it gets another 16.6 per cent. The options are part of the deal in which Fiat and Marchionne were appointed to manage Chrysler in 2009 by the US government. The government bailed out the struggling Chrysler and funded its trip through bankruptcy restructuring.

Since then, Fiat has raised its stake in the resurgent Chrysler, and Marchionne is merging the companies to generate more cost savings from joint research, management and purchasing.

Once it gains control of the whole company, Fiat is considering a plan to hold an initial public stock offering, which would raise much-needed money for research on new vehicles at both companies, and could help Fiat weather the economic downturn in Europe.
Fiat SpA shares are now traded publicly on the Milan stock exchange, while Chrysler is technically a private company with no publicly traded shares. Presumably, Fiat shareholders would be offered a stake in the new company if they approve the merger.

Merging the companies would give Fiat access to Chrysler's cash. Currently, Fiat shares in Chrysler's profits but can't use the Detroit automaker's funds for its own operations. Fiat lost USD 108 million in the first quarter, while Chrysler made USD 166 million. Without Chrysler, Fiat would have lost USD 1.41 billion last year. Chrysler had USD 11.9 billion in cash as of March 31.