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Fiat Industrial to merge with CNH; leave Italy

by Bill Cawthon on

In what could set a pattern for Fiat and Chrysler, Fiat Industrial S.p.A. today sent a proposal to CNH Global to merge the two companies. While a merger would have to be blessed by the board of directors and the shareholders of each company, a Fiat Industrial statement says the “company intends to vote all of its shareholdings in CNH in favor of the proposed transaction.”

Since Fiat Industrial owns 88 percent of CNH Global, it’s basically a done deal and the rest is just paperwork.

According to the proposal, the companies would merge into a new holding company that would be organized in the Netherlands. The new firm would issue stock to be listed on the New York Stock Exchange with a secondary European listing. This would simplify the capital structure, creating a single class of liquid stock and build a company that would be competitive with North American manufacturers. The combination would create the world’s third-largest capital goods producer, uniting CNH’s agricultural and construction equipment operations with Iveco trucks and FPT Industrial’s (Fiat Powertrain Technologies) power and transmission products. The proposed transaction will have no impact on operations or headcounts.

“The proposed transaction is a natural extension of the process of simplification of the Fiat world. It began with the demerger of Fiat and Fiat Industrial in 2010, and was followed by the share class unification. These events revealed clearly the unappealing nature of the two separate listings of FI and CNH, and the impediments imposed by that structure on our efforts to reap the benefits of positioning in the capital markets one of the largest capital goods companies in the world. The proposed transaction allows the capital markets to properly assess the combined value of FI and CNH,” said Sergio Marchionne, FI’s Chairman. “This clarity will also facilitate the financing of these operations at an appropriate cost and provide the necessary flexibility for future strategic transactions.”

The proposal does protect the interests of Exor, the Agnelli family holding company, through the adoption of a structure that would effectively give the Agnelli family double votes.

Fiat Industrial says the proposal does have a few conditions: First, a cap of 250 million euros (about $311.3 million) on the exercise by FI shareholders of withdrawal rights that arise under Italian law as a consequence of the relocation from Italy to the Netherlands as well as any exercise of creditors’ rights. Because FI has stated that it does not intend to consider a cash offer for CNH shares, this would be the maximum cash outlay by the group in connection with the transaction. In addition, the closing of the transaction for each company would be subject to receipt of any necessary regulatory approvals.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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