NEW YORK: US carmaker Chrysler has asked banks applications next month for a mandate to run a potential public listing of its shares, four people familiar with the matter said, as parent Fiat wrangles with minority shareholder VEBA over a possible buyout.
Chrysler will interview investment banks in April for a underwriting role in a proposed initial public offering (IPO), the people familiar with the matter told Reuters.
Three of the people said bankers had been asked to prepare a “dual-track” sale leading either to the flotation of Chrysler shares owned by a United Auto Workers union retiree healthcare trust, VEBA, or an agreed buyout of its stake by Fiat.
Fiat owns 58.5 per cent of Chrysler, while the other 41.5 per cent is owned by VEBA.
A Chrysler Group spokesman said he had not heard of an April meeting of bankers for an IPO. Fiat declined to comment.
Fiat’s shares rose 1 per cent on Thursday, closing at 4.194 euros, outperforming the Milan stock exchange which rose 0.3 per cent.
Sergio Marchionne, Chief Executive of both Fiat and Chrysler, has long wanted to merge the two automakers but has said he would be open to an IPO if Fiat and VEBA could not reach a deal.
Fiat has options to buy blocks of shares from VEBA, but its attempts to exercise them has been contested in court over their valuation. An IPO pitching process could provide a way of independently valuing the company and settling the argument.
Fiat has no intention of reducing its ownership, said the sources, who asked not to be identified because the discussions are private.
Marchionne said earlier this week that he expected to reach a deal with VEBA and avert a public listing. Talks are also starting on how Fiat would finance any future takeover of Chrysler, the people familiar with the matter said.
Under a deal struck in 2009, when Fiat rescued Chrysler from bankruptcy, the Italian carmaker has options to purchase up to 16.6 per cent from VEBA at a price set by an agreed formula. But the two sides have been arguing about the arithmetic for months.
Fiat filed last July to buy the first 3.3 per cent for $139.7 million, but VEBA said the transaction value was $342 million, and the issue has been in court ever since.
In January, VEBA said it would exercise a separate entitlement to sell Chrysler shares in an IPO, formally asking the company to register with the US Securities and Exchange Commission for a 16.6 per cent issue.
Fiat has valued Chrysler at $4.2 billion in court filings, way below VEBA’s $10.3 billion figure. UBS put the US carmaker’s worth at around $9 billion in November.
Richard Hilgert, a Chicago-based analyst with Morningstar, estimates the value of Chrysler to be $13.5 billion, he said on Thursday.
But he cautioned that watching the drama of the court case or a possible IPO misses the point when each are expected to be factors in the major goal of Marchionne’s that Fiat buy Chrysler outright.