Italy-based carmaker Fiat said it would be acquiring the Chrysler Group stake owned by a voluntary employee beneficiary association or VEBA in a deal valued at $4.35 billion, Bloomberg reported. The report said that buying the stake held by the United Auto Workers retiree healthcare trust is the final step needed so that the two carmakers can combine.
Under the terms of the agreement, US-based Chrysler will be giving majority of the cash requirement, putting less pressure on its Italian parent that is trying to stem losses experienced in Europe. Citing a statement from Fiat, the report said that the Italian carmaker which owns 58.5% of Chrysler will fork out cash amounting to $1.75 billion to pay the trust. To complete the deal for the remaining 41.5% stake, Chrysler will then contribute $1.9 billion through a special dividend.
Chrysler also agreed to pay a total of $700 million to be made in four equal yearly installments to the trust. The first installment will be given when the deal closes which Fiat expects to happen by January 20. Fiat said the money would be taken from the cash on hand and a share sale is most likely not necessary. The report said that the agreement with the trust will make Fiat the full owner of Chrysler, the No. 3 carmaker in the US, in just less than five years after it underwent a government-financed bankruptcy.
In a statement, Fiat and Chrysler Chief Executive Officer Sergio Marchionne said, "In the life of every major organization and its people, there are defining moments that go down in the history books. For Fiat and Chrysler, the agreement just reached with the VEBA is clearly one of those moments."
Since leading Fiat in 2004, Marchionne has looked at merging both companies. In June, he estimated that the combined automakers will make it the seventh biggest carmaker in the world, the report said.
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