Chrysler Group LLC, the partly-owned subsidiary of
), has filed a registration statement with the U.S. Securities
and Exchange Commission (SEC) for a public offer of its shares.
The decision comes under pressure from the minority owner UAW
Retiree Medical Benefits Trust (VEBA Trust), which owns 41.5% of
Fiat, which holds a 58.5% stake in Chrysler, has been trying
to acquire the remaining shares from the VEBA Trust. However, the
two owners have not been able to settle on a purchase price.
This conflict resulted in the trust's demand for an IPO
expecting a better price for its stake. J.P. Morgan Securities
JPMorgan Chase & Co.
) will manage the IPO.
However, the issue price and the number of shares to be
offered have not been decided yet, although the IPO is expected
to be valued at around $100 million. Only the stake of VEBA Trust
will be sold, while Fiat will retain its holding.
According to media reports, Fiat is not pleased with the IPO
decision and is reconsidering extending its alliance with
Chrysler. If the company decides to forego an extension, it will
hurt the profitability and financial position of Chrysler.
Management of Chrysler expects the IPO to take place in the
first quarter of 2014, although it does not rule out the
possibility of it taking place at the end of this year. However,
the filing of Form S-1 by Chrysler need not translate in an IPO
if Fiat and the VEBA Trust agree on a purchase price and go ahead
with a private transaction.
Chrysler used to trade on the New York Stock Exchange (NYSE)
until Nov 1988. Thereafter, it was acquired by
) and later, Cerberus Capital Management purchased an 80% stake
in the company. Fiat then acquired Chrysler in 2009 when the
latter became bankrupt.
Since then, the parent company has managed to turn the
subsidiary profitable. Chrysler has recorded eight consecutive
quarters of earnings growth.
Fiat currently carries a Zacks Rank #3 (Hold). Another
automobile stock worth considering at present is
Fuji Heavy Industries Ltd.
), which carries a Zacks Rank #1 (Strong Buy).
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