US to sell Chrysler stake to Fiat
The announcement marks the full withdrawal of the Obama administration as a Chrysler Group shareholder two years after it took a hand in the business and means that the Treasury will recover $11.2bn (€7.7bn) of the $12.5bn (€8.6bn) investment it made in the carmaker under the Troubled Asset Relief Program in 2009.
The deal will be announced by President Obama during a visit to a Chrysler plant in Toledo, Ohio, today (6 June).
'As Treasury exits its investment in Chrysler, it's clear that President Obama's decision to stand behind and restructure this company was the right one,' Treasury secretary, Timothy Geithner, said in a statement. 'Today, America's automakers are mounting one of the most improbable turnarounds in recent history – creating new jobs and making new investments in communities across our country.'
The move means that Fiat will become a major stakeholder in Chrysler, with a 52% share.
Christian Georges, industrial sectors strategist at Olivetree Securities, said: 'The announcement that Fiat has acquired the option to buy-out the union’s remaining stake suggests that no IPO may be required. Instead, we may get a full-blown merger with Fiat and associated listing in the US. This is great news as it would rank Fiat alongside GM and Ford for US investors.
'With a stake over 50% Fiat will be able to consolidate Chrysler in to its accounts. While Fiat is losing money in Europe, Chrysler makes money in the US – particularly since it will not be paying high interest rates on government loans anymore. In fact, Chrysler is outperforming domestic peers in the US due to the on-going renewal of key models. This suggests the valuation of Chrysler (likely within Fiat in the future) is worth more than what Fiat has paid.'
In addition, Fiat is to pay $75m (€51.8m) to buy options held by the American and Canadian governments to purchase Chrysler shares held by a trust for retired autoworkers.
Both transactions are subject to the usual regulatory approvals being received.