Chrysler sees UAW trust pushing for possible IPO

Chrysler sees UAW trust pushing for possible IPO
Craig Trudell
and Mark Clothier
Automotive News | January 9, 2013 – 4:34 pm EST

DETROIT (Bloomberg) — Chrysler Group said its minority shareholder demanded a registration for its holdings in a step toward a possible public stock offering.

Chrysler, majority owned by Fiat S.p.A., will comply with the demand by the UAW Retiree Medical Benefits Trust, which owns 41.5 percent of the automaker, according to a statement today.

The trust, which is a voluntary employee beneficiary association, or VEBA, wants to register 16.6 percent of the shares in Chrysler, the company said.

“Registration is a first step in preparing to sell those interests through a public offering of stock,” Chrysler said in a statement. “Chrysler Group will make reasonable best efforts to register those shares as requested. Registration does not mean there will be an IPO.”

Sergio Marchionne, CEO of both Fiat and Chrysler, plans to merge the two companies by 2015 after striking an initial alliance through the U.S. automaker’s bankruptcy more than three years ago.

Fiat, mired in the Europe auto market’s slump, faces restrictions in accessing Chrysler’s cash as part of conditions set by the U.S. government’s rescue.

Fiat owns 58.5 percent of Chrysler.

The Italian automaker is in a legal dispute with the UAW trust over the price it must pay to exercise an initial call option that would boost its ownership stake to almost 62 percent.

The UAW trust said in a November court filing that it’s owed $342 million, more than double the $139.7 million that Fiat has said the shares should be worth. Fiat said Jan. 3 that it plans to exercise a second call option that would increase its stake to about 65 percent.

‘Clearer price’

“This will provide a clearer price for what Fiat will need to pay to pick up the remaining shares beyond the call options,” Richard Hilgert, an analyst for Morningstar Equity Research in Chicago, said today in a telephone interview. “It’s more probable that Fiat will wind up buying the shares before it goes to an IPO, and this gives VEBA a bit of negotiating leverage to say here’s what the market would pay for this chunk of stock right now.”

Patty McCarthy, a spokeswoman for the VEBA, didn’t immediately respond to an e-mailed request for comment.

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