Milan — Fiat rose the most in almost five years in Milan trading after Mr Sergio Marchionne, chief executive of Chrysler and its Italian parent, struck an accord to buy a 41,5 percent stake from a United Auto Workers retiree health-care trust.
The number three U.S. car-maker will put up most of the funding for the transaction, underscoring the CEO’s reputation as a deal-maker. “Marchionne did a great job,” Vincenzo Longo, a strategist at IG Group in Milan, said. “Fiat couldn’t get a better deal.”
The agreement limits the amount of money that Turin-based Fiat must spend to take over and merge with Chrysler, which it helped rescue from bankruptcy almost five years ago.
That puts the Italian company in a position to gain financial resources from the US unit to help turn around unprofitable European operations.
Marchionne has sought since taking the helm at Fiat in 2004 to combine the company with another car-maker to challenge Toyota Motor Corp, GM and Volkswagen AG in sales.
Assigning the majority of the transaction to Chrysler is “a bit of a coup and will be seen as a big positive surprise,” said Max Warburton, an analyst at Bernstein Research in Singapore.
“The deal successfully secures Fiat’s operational and financial future.”
Stock Jumps
Fiat jumped as much as 16 percent, the biggest intra-day gain since April 2009, and was trading up 13 percent at 6,74 euros. The Italian manufacturer, which already holds 58,5 percent of Auburn Hills, Michigan-based Chrysler, will pay the trust US$1,75 billion in cash when the deal closes, Fiat said yesterday in a statement. Chrysler will contribute US$1,9 billion through a special dividend to complete the transaction for the 41,5 percent stake.
In addition, Chrysler agreed to pay the trust US$700 million in four annual instalments, with the first to be made when the deal closes, which Fiat expects by January 20. The Italian company said the money would come from cash on hand and that a share sale probably won’t be needed. — Bloomberg.