The deal was scheduled to close by Monday but had to be delayed because banks were closed for the Martin Luther King Day holiday.
Completion of the deal brings to a conclusion Chrysler Group LLC and Fiat SpA CEO Sergio Marchionne’s nearly five-year quest to merge the two automakers both operationally and financially. It also effectively means that Chrysler is fully owned by Fiat, even though it will retain its presence in Michigan.
The deal also resolves a lawsuit between Fiat and the UAW trust over the value of the shares and averts a potentially complicated initial public offering for Chrysler that the United Auto Workers’ Retiree Medical Benefits Trust could have forced the automaker to undertake.
For the UAW Trust, which provides medical benefits to 117,000 UAW-represented Chrysler retirees, the deal provides much-needed funding.
The UAW Trust said it received $3.825 billion Tuesday and said the proceeds will be used to provide additional funding security for the health benefits for Chrysler retirees and dependents.
“We reached a successful conclusion that will benefit the trust’s retirees,” Robert Naftaly, chairman of the committee that governs the trust, said in a statement. “This was always our goal. As a result, the trust is stronger.”
Fiat became Chrysler’s controlling shareholder in 2009 when the Auburn Hills, Mich., automaker emerged from Chapter 11 bankruptcy.
Under the terms of agreement, Chrysler will contribute $1.9 billion and Fiat will contribute $1.75 billion to purchase the shares held by the UAW Trust. Chrysler also will pay $700 million more to the VEBA Trust in four equal annual installments.
The first annual payment, $175 million, will occur when the transaction closes. Additional $175 million payments will be made in the next three years on the anniversary of the initial payment.
A number of new questions must now be resolved now that Fiat and Chrysler are a unified company.
Marchionne said last week that Fiat’s board of directors will meet Jan. 29 to discuss a new name for the combined company, the stock exchange on which the company’s shares will be listed, and the location of the company’s headquarters.
The issue of the name is sensitive on both sides of the Atlantic. In Italy, where Fiat is the largest private-sector employer, workers and unions have been on edge for several years, concerned that Fiat’s focus has been shifting to North America.
Here in the U.S., memories still linger over the disastrous DaimlerChrysler marriage that was billed as a merger of equals in 1998.
“ ‘Fiat’ and ‘Chrysler’ will be in the name,” Marchionne said last week.
While Fiat shares now trade on the Milan Stock Exchange, Marchionne said last week it would make more sense for the combined company to be listed on a U.S. stock exchange.
“If you were to look at this objectively and you were trying to make a choice that reflected access to capital markets and the ability to finance operations and so on, then by definition, the United States would appear to have the large claim in terms of its right to at least the financial markets to house the combined Fiat/Chrysler,” Marchionne said last week.
“But I don’t want to speak out of turn. The board needs to take a look at this and make a determination,” Marchionne said.
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