Fiat SpA plans to exercise an option to buy the Treasury’s stake in Chrysler, which paves the way for the Italian automaker to clinch a majority share in the company by early next month.
Fiat notified the Treasury of its intent on Friday. The purchase price will be based on the equity value of Chrysler agreed by Treasury and Fiat within 10 business days.
If Fiat and Treasury cannot settle on the price, the amount will be determined by two of three investment banks appointed by the company and the US government.
The option would allow Fiat to increase its stake in Chrysler by 6 per cent, Fiat said in a release on Friday.
Treasury confirmed that it received notice from Fiat, but declined to discuss the announcement further. The announcement comes ahead of President Barack Obama’s planned visit to a Chrysler plant in Toledo, Ohio, next week. This week, Fiat boosted its stake in Chrysler to 46 per cent after repaying $7.6 billion in loans from the United States and Canada through a refinancing deal.
A deal with Treasury would bring its stake to 52 per cent.
Sergio Marchionne, the chief executive of both Fiat and Chrysler, has said his overarching goal this year was for Fiat to obtain a majority share in Chrysler. Marchionne told Reuters on Friday that Fiat would be interested in buying Canada’s stake in Chrysler for a “reasonable price”, but said he had not discussed it with Canadian authorities.
Earlier this month, Chrysler said in a regulatory filing that Fiat had options to increase its holding to more than 70 per cent, which included buying the US Treasury stake within 12 months of repaying the loans.
