Fiat will pay $1.27 billion to attain a 51% majority in Chrysler Group LLC. This means that Fiat and Chrysler CEO Sergio Marchionne will have completed his conquest two years faster than was originally planned. The Italian automaker said today that it will increase its stake to 46% sometime in the second quarter, after completing a refinancing deal to effectuate the repayment of government loans made to Chrysler. The other 5% needed to reach 51% will come from the US government after Chrysler meets certain targets that were a part of the original bankruptcy deal.
The total amount still owed by Chrysler to the US and Canadian governments is $7.53 billion, according to a February filing with the US SEC. That sum must be paid in total before Fiat assumes a majority stake in Chrysler.
Marchionne is expecting big things for Chrysler in 2011, anticipating a net income as high as $500 million.
“Fiat should save more than $400 million by exercising the call option in the second quarter instead of in the following quarters,” Gabriele Gambarova, a Banca Akros analyst in Milan, said in a note to investors. “As long as Chrysler’s results improve, the call option exercise would have become more expensive.”
– By: Stephen Calogera
Source: Automotive News