Shareholders poised to approve formation of Fiat Chrysler Automobiles – Detroit Free Press

Posted: Friday, August 01, 2014

Fiat shareholders approved a merger today that will lead to the creation of a new company — Fiat Chrysler Automobiles — today at a meeting in Turin, Italy.

The decision marks the end of an era in Italy as Fiat — founded 115 years ago by Giovanni Agnelli — exits the country, at least as a company offically incorporated there.

Approval also brings Fiat and Chrysler CEO Sergio Marchionne one step closer to his dream of completely restructuring the two automakers into a single automaker that can operate efficiently around the world.

Fiat shareholders who met in Turin voted in favor of a merger with Chrysler that has been five years in the works and will shift the 115-year-old carmaker’s center of gravity abroad.

Technically, shareholders were asked to vote in favor of folding Italy-based Fiat Spa into Netherlands-based Fiat Investments NV, which will be renamed Fiat Chrysler Automobiles. Chrysler will continue to operate as a subsidiary.

Practically, the merger is designed to make Fiat Chrysler Automobiles more attractive to investors and bankers, especially after new stock is listed on the New York Stock Exchange later this year. Many analysts say Fiat will need additional capital to complete an ambitious restructuring plan in Europe.

“It is an issue that we need to address on completion of this merger,” Marchionne told analysts earlier this week.

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Fiat became Chrysler’s controlling shareholder in 2009 when the Auburn Hills automaker emerged from Chapter 11 bankruptcy. The Italian automaker became Chrysler’s 100% owner in January.

New stock, under the symbol FCA, is expected to begin trading on the New York Stock Exchange in mid-October as long as the deal isn’t challenged by investors or shareholders within 60 days.

Marchionne and the company’s board picked the Netherlands and London in an effort to avoid controversy either in Italy or the United States.

“The Netherlands is a neutral jurisdiction that is not identified with either of the historical jurisdictions of the largest businesses operated by the Group and provides a governance regime that is believed to be attractive to investors in multinational enterprises,” the company said in a document on its web site. “A Dutch incorporation … will provide additional flexibility in raising capital or making strategic acquisitions or investments in the future.”

While the legal structure of the companies will change, Marchionne has said very few employees will be affected.

“FCA and Fiat do not expect that the merger itself will result in any significant operational cost savings or synergies,” the company said in a statement on its web site.

Both Fiat’s board of directors and Exor, an investment firm controlled by Fiat’s founding Agnelli family, favored the merger.

Institutional Shareholder Services, a company that advises large shareholders, recommended shareholders vote against the merger in a report this month because Exor could emerge with more control of the company.

“On the whole, the loyalty voting system goes against the one-share, one-vote principle, ” ISS said.

Under the merger plan, most current shareholders are eligible for a second voting share designed to reward Fiat shareholders for their loyalty, effectively giving them two voting shares.

Exor, an investment fund controlled by the Agnelli family, currently owns 30.05% of Chrysler. Fiat and Chrysler disclosed last month that Exor’s voting power could rise to as much as 46%, but only if all existing shareholders opted out of the loyalty voting structure.

“If all shareholders elect to participate in the loyalty voting structure … the voting power of all shareholders, including Exor, will be unchanged,” Fiat said in a filing with the U.S. Securities and Exchange Commission.


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