Italian car company FIAT, which already owns a majority stake in the American automobile maker Chrysler, says it plans to buy the remaining 41%. FIAT shares surged 15% after the news was released.
According to FIAT, the transaction will be finalized on or by January 20th, 2014.
FIAT and VEBA, the healthcare trust affiliated to the United Auto Workers’ union, reached an agreement after a very long period of negotiations.
Fiat gets 100% of Chrysler in $4.35 billion deal
FIAT and the VEBA Trust agreed to a memorandum of understanding (MoU) under which the Chrysler Group is to provide additional contributions to the healthcare trust with an aggregate of $700 million in four equal annual installments. This is on top of Fiat’s initial payment of $3.65 billion.
VEBA is to receive the initial payment as soon as it had sold its interest in Chrysler. Chrysler says the additional payments will be funded from available cash on hand.
The VEBA Trust deals with the medical benefits of approximately 117,000 Chrysler employees and their dependents.
The transaction will create the 7th largest car company
FIAT’s total acquisition of the Chrysler group will create the seventh largest automobile maker in the world.
John Elkann, Chairman of Fiat, said:
“I have been looking forward to this day from the very moment that we were chosen to assist in the rebuilding of a vibrant Chrysler back in 2009. The work, commitment and achievement I have witnessed from Chrysler over the past four and a half years is nothing short of exceptional, and I take this opportunity to officially welcome each and every one of the people in the Chrysler organization to the integrated Fiat-Chrysler world.”
Sergio Marchionne, Chief Executive of Fiat and Chairman and CEO of Chrysler Group, said:
“In the life of every major organization and its people, there are defining moments that go down in the history books. For Fiat and Chrysler, the agreement just reached with the VEBA is clearly one of those moments. I will be forever grateful to the leadership team for the support and unwavering dedication shown to the integration project that today has taken its final shape.”
“The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how, a solid and open organization that will ensure all employees a challenging and rewarding environment.”
Bloomberg News quoted Vincenzo Longo, a strategist at IG Group in Milan, who said “Marchionne did a great job, Fiat couldn’t get a better deal.”