UAW trust taps Deutsche Bank to advise on Chrysler share exit, report says

UAW trust taps Deutsche Bank to advise on Chrysler share exit, report says

Automotive News | September 25, 2013 – 1:32 pm EST

DETROIT (Reuters) — The UAW’s trust fund has tapped Deutsche Bank for advice on how to exit its 41.5 percent stake in Chrysler Group, according to two people familiar with the matter.

The automaker was forced by the union trust on Monday to file paperwork for an initial public offering. The union trust, Chrysler’s second-biggest shareholder, is mired in an escalating dispute with main owner Fiat S.p.A.

Fiat, which owns 58.5 percent of Chrysler, wants to take full control and buy out the rest of the stock owned by VEBA, a healthcare trust fund affiliated with the United Auto Workers union, but has balked at the more than $5 billion that VEBA has demanded.

In response, VEBA has exercised a right guaranteed in Chrysler’s 2009 government-financed bankruptcy to go forward with an initial public offering, stepping up pressure on Sergio Marchionne, chief executive of both automakers, to reach a deal.

The trust is being advised by Deutsche Bank as it weighs whether a gradual sale of shares through an IPO would generate more proceeds than an outright sale of the entire stake to Fiat, the people familiar with the matter said on Wednesday. They asked not to be identified because the matter is not public.

VEBA did not immediately respond to requests for comment. Brock Fiduciary, which has managed the trust’s holdings in Chrysler since 2010, declined to comment. Deutsche Bank also declined to comment.

Fiat brought in a veteran of the 2009 U.S. auto sector bailout, Lazard Vice Chairman Ron Bloom, in a bid to break the deadlock in talks for it to buy out VEBA’s stake, a person familiar with the matter told Reuters last week.

Separately, JPMorgan Chase & Co. has been appointed to lead the Chrysler IPO if the Fiat buyout fails to happen.

Marchionne, who runs Fiat and Chrysler as one company, wants to buy VEBA’s stake in Chrysler to create the world’s seventh-largest car manufacturer and secure access to cash and technology it needs to stay competitive.

Under Marchionne, Chrysler has mounted an unlikely comeback that has pushed its valuation to over $10 billion, according to some analyst estimates. The U.S. automaker is now propping up Fiat’s bottom line, rather than the other way around.

However, Chrysler’s success has complicated Marchionne’s efforts to buy out the fund. The more than $5 billion price tag sought by VEBA represents the highest possible payout under the terms of the bankruptcy agreement.

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