Fiat Chrysler trades on NYSE Monday
10/9/14, 03:54 PM
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Fiat Chrysler trades on NYSE Monday
Fiat Chrysler preps for NYSE listing on Monday
By Eric Sylvers
Published: Oct 9, 2014 4:37 p.m. ET
Shares of Fiat Chrysler Automobiles NV start trading Monday on the New York Stock Exchange, a key step toward shifting the auto maker's center of gravity to the U.S. and possibly helping pay for a EUR48 billion ($61.1 billion) makeover.
Chief Executive Sergio Marchionne has breathed new life into Chrysler and turned around Fiat, two auto makers at death's door before he took hold of them. Today, Fiat Chrysler is the world's seventh-largest car maker, and aiming to revamp aging factories and product lines to move sales closer to the industry's big three: Toyota Motor Corp., General Motors Co. and Volkswagen AG.
A priority of the U.S. listing is to deepen the company's pool of investors, giving Mr. Marchionne potential access to fresh capital as the company continues to build its sales and scan the horizon for potential alliances. Broadening Fiat's profile in China and elsewhere is a costly next step in that process.
To date, Mr. Marchionne has seen Fiat's Italian heritage as being too much of a liability. He wanted to shut many of the company's unprofitable Italian plants, but those plans were blocked by politicians and labor unions.
"[Mr.] Marchionne desperately wants Fiat not to be seen as mostly an Italian company," said an investment banker who has worked for the car maker. "He would love to pull out of Italy completely, but he knows that's politically impossible. What he can do is leave Italy gradually, which is what this U.S. listing is all about."
Fiat declined to comment. Mr. Marchionn wasn't available for an interview, but n the past affirmed Fiat's commitment to continue producing cars in Italy.
The U.S. stock listing is part of a larger corporate reorganization that shift's Fiat's tax residency to London and headquarters to Amsterdam. Shares will continue to be listed in Milan, their longtime trading home.
On Thursday, Fiat said existing shareholders elected to buy six million of the 60 million shares previously tendered to the company by shareholders who opted out of Mr. Marchionne's reorganization plan. The company could decide to sell the remaining 54 million shares after the NYSE listing.
Mr. Marchionne, who has said he plans to retire in 2018, wants Fiat Chrysler to join the ranks of the industry's biggest sellers. His five year plan calls for increasing volume by 60% over 2013 to seven million vehicles.
The merger and U.S. listing could give Mr. Marchionne, 62 years old and a consummate deal-maker, more leverage in selling noncore businesses or pursuing alliances, said Stefano Aversa, European head of restructuring firm AlixPartners.
"I don't think [Mr.] Marchionne has one single strategy, but multiple strategies to be executed according to market conditions and the company's performance," said Mr. Aversa. "The fact that FCA is being listed [in the U.S.] gives him multiple options and that in itself has a value."
The Italian-Canadian executive has forecast a gross operating profit of about EUR65 billion over the life of the plan--an amount that he insists will pay for the expansion. But many analysts and bankers believe Mr. Marchionne would need outside capital; some have suggested he may announce plans to raise as much as EUR2 billion by selling debt, equity or both by the end of the year.
Mr. Marchionne earlier this year said he would consider selling a convertible bond after the U.S. listing, which he maintains will give Fiat Chrysler easier access to capital markets. A first decision on financing will be taken by the board later this month as it meets for the first time in its new London offices.
It is unclear if Fiat's financing costs will fall significantly after a U.S. listing. The company, which has EUR10 billion in debt, is junk rated and pays a higher interest rate than most rivals, but typically has little trouble placing its bonds.
Fiat in July sold a EUR850 million bond with a 4.75% interest rate. "We question how much cheaper a U.S. dollar denominated issuance by a U.S. company would have been," wrote equity researchers at International Strategy and Investment following that issue. It cited Fiat's financial situation and credit rating as reason for skepticism.
There are signs the situation is getting better. Fiat sold another EUR500 million in September of the same bond, and the rate fell to 4.25%.
The New York listing in itself won't change Fiat's credit rating, said Alex Herbert, director of corporate ratings at Standard & Poor's in London. More important will be when Fiat manages to access Chrysler's cash. Fiat Chrysler currently plans to refinance Chrysler bonds in 2016, a move that would allow it to tap all of Chrysler's cash, which at the end of June, stood at $13.3 billion.
http://www.marketwatch.com/story/fia...dist=afterbell
By Eric Sylvers
Published: Oct 9, 2014 4:37 p.m. ET
Shares of Fiat Chrysler Automobiles NV start trading Monday on the New York Stock Exchange, a key step toward shifting the auto maker's center of gravity to the U.S. and possibly helping pay for a EUR48 billion ($61.1 billion) makeover.
Chief Executive Sergio Marchionne has breathed new life into Chrysler and turned around Fiat, two auto makers at death's door before he took hold of them. Today, Fiat Chrysler is the world's seventh-largest car maker, and aiming to revamp aging factories and product lines to move sales closer to the industry's big three: Toyota Motor Corp., General Motors Co. and Volkswagen AG.
A priority of the U.S. listing is to deepen the company's pool of investors, giving Mr. Marchionne potential access to fresh capital as the company continues to build its sales and scan the horizon for potential alliances. Broadening Fiat's profile in China and elsewhere is a costly next step in that process.
To date, Mr. Marchionne has seen Fiat's Italian heritage as being too much of a liability. He wanted to shut many of the company's unprofitable Italian plants, but those plans were blocked by politicians and labor unions.
"[Mr.] Marchionne desperately wants Fiat not to be seen as mostly an Italian company," said an investment banker who has worked for the car maker. "He would love to pull out of Italy completely, but he knows that's politically impossible. What he can do is leave Italy gradually, which is what this U.S. listing is all about."
Fiat declined to comment. Mr. Marchionn wasn't available for an interview, but n the past affirmed Fiat's commitment to continue producing cars in Italy.
The U.S. stock listing is part of a larger corporate reorganization that shift's Fiat's tax residency to London and headquarters to Amsterdam. Shares will continue to be listed in Milan, their longtime trading home.
On Thursday, Fiat said existing shareholders elected to buy six million of the 60 million shares previously tendered to the company by shareholders who opted out of Mr. Marchionne's reorganization plan. The company could decide to sell the remaining 54 million shares after the NYSE listing.
Mr. Marchionne, who has said he plans to retire in 2018, wants Fiat Chrysler to join the ranks of the industry's biggest sellers. His five year plan calls for increasing volume by 60% over 2013 to seven million vehicles.
The merger and U.S. listing could give Mr. Marchionne, 62 years old and a consummate deal-maker, more leverage in selling noncore businesses or pursuing alliances, said Stefano Aversa, European head of restructuring firm AlixPartners.
"I don't think [Mr.] Marchionne has one single strategy, but multiple strategies to be executed according to market conditions and the company's performance," said Mr. Aversa. "The fact that FCA is being listed [in the U.S.] gives him multiple options and that in itself has a value."
The Italian-Canadian executive has forecast a gross operating profit of about EUR65 billion over the life of the plan--an amount that he insists will pay for the expansion. But many analysts and bankers believe Mr. Marchionne would need outside capital; some have suggested he may announce plans to raise as much as EUR2 billion by selling debt, equity or both by the end of the year.
Mr. Marchionne earlier this year said he would consider selling a convertible bond after the U.S. listing, which he maintains will give Fiat Chrysler easier access to capital markets. A first decision on financing will be taken by the board later this month as it meets for the first time in its new London offices.
It is unclear if Fiat's financing costs will fall significantly after a U.S. listing. The company, which has EUR10 billion in debt, is junk rated and pays a higher interest rate than most rivals, but typically has little trouble placing its bonds.
Fiat in July sold a EUR850 million bond with a 4.75% interest rate. "We question how much cheaper a U.S. dollar denominated issuance by a U.S. company would have been," wrote equity researchers at International Strategy and Investment following that issue. It cited Fiat's financial situation and credit rating as reason for skepticism.
There are signs the situation is getting better. Fiat sold another EUR500 million in September of the same bond, and the rate fell to 4.25%.
The New York listing in itself won't change Fiat's credit rating, said Alex Herbert, director of corporate ratings at Standard & Poor's in London. More important will be when Fiat manages to access Chrysler's cash. Fiat Chrysler currently plans to refinance Chrysler bonds in 2016, a move that would allow it to tap all of Chrysler's cash, which at the end of June, stood at $13.3 billion.
http://www.marketwatch.com/story/fia...dist=afterbell
10/9/14, 04:04 PM
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