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“Cashing out” of FCA

by David Zatz on

Analysts have reported on the Fiat / Chrysler merger being dependent on having less than around 5% of the stock “cashed out,” and early this morning, Fiat issued a release detailing the process.

Fiat and Chrysler CEO Sergio Marchionne has told the media that, if this attempt to merge failed, the company would regroup and try again. “Cashing out”  — that is, selling stock at a price equal to the simple average of the stock price over the last six months, or 7.27 euros per share — would presumably be less attractive in six months, since Fiat stock was riding high until just before the merger vote.

Chrysler-Fiat-FCA-Web

Only stockholders who have held stock since before the vote and have not voted in favor of the merger are eligible to cash out. The process is:

… send written notice to Fiat by registered mail by 20 August 2014. The notice must provide: (i) personal details for the shareholder, including tax code; (ii) contact details for the shareholder – including telephone number and, where possible, e-mail address – for communications relative to the procedure; and (iii) the number of Fiat ordinary shares for which the cash exit right is being exercised. The notice must also provide details of the intermediary with which the Fiat ordinary shares are deposited, together with a statement from the shareholder declaring that these shares are free and clear of any pledge or other encumbrance.

The shareholder must, when the notice is sent, also request that the intermediary send the appropriate communication to Fiat certifying that the shareholder was the holder of the shares prior to the EGM and remained the holder of the shares through the date of the above communication. …. Any notice that is sent after 20 August 2014 or that lacks the required information or that is not accompanied by the required communication from an intermediary are of no legal effect and will be rejected.

Fiat said it expected to be able to tell whether a “critical mass” of cash-out requests had been received on the week of September 1. Those who want to cash out cannot sell their shares in the meantime.

Some expect Fiat shares to rise once the merger is complete, partly because the “cash-out hurdle” will have been overcome, and partly because the stock will be purchased by huge index-based mutual funds. Fiat stock hit 9.07 euros per share as recently as April, but fell suddenly in in May; it is currently at 6.91 euros per share [update, 3 pm EST: 6.99 euros], too close to the exit price to be worth the paperwork for small investors.


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