Chrysler Prepares – Reluctantly – for IPO

Monday, 23 Sep 2013 05:30 PM

 

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Chrysler Group is reluctantly preparing for an initial public offering of some of its shares.

The automaker is proceeding with the IPO after it failed to reach an agreement on the value of the stock with the retiree trust that owns it.

Chrysler shares haven't been publicly traded since 1998, when the company merged with Daimler AG. The Auburn Hills, Mich.-based automaker is now majority owned by Italian automaker Fiat SpA.

The shares that will be sold are owned by a United Auto Workers-run trust that pays the health care costs for around 130,000 blue-collar Chrysler retirees. The trust currently owns a 41.5 percent stake in Chrysler, and will get all of the proceeds from the sale if it goes forward.

Sergio Marchionne, the CEO of both Fiat and Chrysler, has made it clear that he wants to buy up the UAW's share and combine Fiat and Chrysler. But the two sides have been unable to agree on a price the shares are worth.

Last year, Fiat sued the trust in Delaware Chancery Court, saying a 3.3 percent stake it wanted to buy was worth $139.7 million. The trust contended the shares were worth $200 million more than that. In July, a judge refused to set a price and said the issue would have to go to trial, a process that could take several more years.

The trust fund needs cash to pay medical bills for thousands of Chrysler blue-collar retirees, so it has to sell the shares to another party, such as Fiat, or sell to the public. At the trust's request, Chrysler started preparing the paperwork for an IPO at the beginning of this year.

The company filed the paperwork with the U.S. Securities and Exchange Commission late Monday.

Chrysler exited the U.S. public market 15 years ago, when Daimler acquired it. But the combination was a disaster, and Daimler sold most of Chrysler to private equity firm Cerberus Capital Management in 2007.

Cerberus hoped to stanch Chrysler's losses and rebuild the company, but was stopped short by the recession, which caused U.S. car sales to plummet. Despite accepting billions in loans from the U.S. government, Chrysler filed for bankruptcy protection in April 2009.

In a deal brokered by the U.S. government, Fiat took over Chrysler's operations when it emerged from bankruptcy less than three months later. Fiat was given a 20 percent stake in Chrysler, and has gradually acquired more of the company.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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