A week ago, we reported that Fiat was increasing its stake in Chrysler to 30 percent by satisfying the government’s criteria of earning $1.5 billion in profits outside the U.S. Negotiations to purchase an additional 16 percent stake from Chrysler shareholders have apparently gone smoothly, as Fiat has reached an agreement to pay $1.27 billion for the shares which will help get Fiat majority control of Chrysler.
As part of an option outlined in Fiat’s initial purchase of 20 percent of Chrysler back in 2009, the additional 16 percent was expected to cost the Italian company up to $1.5 billion cash. However, the deal was struck sooner and cheaper than anticipated, giving Fiat a total stake of 46 percent. The final five percent Fiat will need for a controlling stake in Chrysler come from the U.S. Government. When the company can build a Fiat-based car in America that gets at least 40 mpg, Fiat can purchase the next 5 percent stake. The Fiat 500 might become that car, but current estimates put its highway mileage at only 38 mpg. Acquiring that additional five percent will bump Fiat up to a 51 percent stake, giving it majority control.
Although the deal to purchase the 16 percent from the shareholders has been negotiated, the exchange can’t take place until Chrysler’s debt has been settled. Fiat expects to pay off all its government loans by the second quarter, which would put the closing of the deal sometime in the coming months.
Source: Autmotive News (Subscription required)