Fiat (FIA.MI) Determined Not To Raise The Exit Price Cap- Willing To Start The Merger Process All Over Again

On Tuesday, August 12, Fiat (FIA.MI), a carmaker company that is looking forward to sealing its merger deal with Chrysler, announced that it would not call a meeting of the shareholders nor would it raise the cap of $668 million that it had set previously to pay out those shareholders who did not agree with the merger.

Sergio Marchionne, the chief executive of the company, wants to combine the two principal automobile companies into one corporation. The CEO wants to list the Fiat Chrysler Automobiles (FCA) – the combined company- on the United States stocks exchange so as to attract funding and investment for the seventh largest automobile company in the world.

However, as for now, the merger deal could remain unsuccessful if the company has to pay more than the limit that it had set previously. Keep in mind that the investors have been given a legal right to sell out their shares if they do not want the merger to proceed; the company will have to pay them their share’s value.

Fiat (FIA.MI), in a statement on August 12, said that the company will have to change its cash exit price if it is forced to raise the cap of $668 million as it is in no position to increase the cap. It is pertinent to note here that the shareholders meeting will not result in an increase of the limit; rather a decrease of the exit price, for the company will not be able to merge with Chrysler if it does not have enough cash to pay for the deal.

Fiat (FIA.MI), issued this denial statement after an Italian newspaper La Repubblica reported that the company is willing to raise the limit of the sell-out plan as it wants the merger to go forward. Fiat (FIA.MI) said that it will not raise the cap, nor will it waive off any options.

The current sell-out plan allows the investors to sell their shares for predetermined price of 7.727 euros for each share. This price was based on the average closing price of Fiat’s stocks for a period of 6 months prior to the merger deal.

The CEO reiterated the company’s plan and said that it would not raise the cap. He further said that he would rather be willing to start the merger process all over again but this time on his ‘own conditions’.

If the company calls a shareholder meeting and decides on the new merger conditions, chances are that the exit price will go down as the shares of Fiat (FIA.MI) have tumbled down in the recent weeks. This way, the company will be able to pay more and more dissenters without having to increase the cap imit.

Fiat (FIA.MI) further said that its operational costs will not be affected by this deal. When asked about the deal, the CEO said that the company will have some operational impact if it does not close the deal with Chrysler.

If the deal does not go forward, the CEO of the company will face much embarrassment as he was trying to make this deal since 2009. According to some analysts, the failure of the deal will also increase the financing costs of the company in the future.

On the last trading day, August 12, Fiat (FIA.MI) stocks raised 1.7 percent after having seen a decrease and falling down to 6.26 euros last week.