This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Chrysler Test Drives Its IPO

NEW YORK ( The Deal) -- Chrysler Group late Monday filed to return to public markets amid continuing conflict between the automaker's two primary shareholders.

Auburn Hills, Mich.-based Chrysler filed preliminary paperwork for a proposed offering that would be underwritten by JPMorgan, with Scott D. Miller of Sullivan & Cromwell LLP representing the company and William P. Rogers Jr. and William V. Fogg of Cravath, Swaine & Moore LLP serving as underwriter counsel.

The filing highlights both the remarkable success Chrysler has experienced since its 2009 government bailout, and the infighting that has plagued it more recently.

Chrysler emerged from Chapter 11 protection with financial support from Fiat as part of a complex deal that has resulted in the Italian carmaker steadily increasing its ownership to 58.5%. The remaining shares are owned by a union-managed trust established in 2007 to pay retiree healthcare costs.

Fiat has been seeking to bring Chrysler in-house as a wholly owned unit, but the company to date has been unable to reach an agreement with the United Automobile Workers' Voluntary Employee Beneficiary Association on a valuation of the remaining VEBA-owned shares. Combining the two companies would allow Fiat to access Chrysler's cash reserves to fund operations as well as make it easier for the Italian company to cut back office costs by further integrating their operations.

Chrysler has enjoyed recent sales success thanks in part to new, more fuel-efficient designs borrowed from Fiat, generating a profit of $507 million in the second quarter of 2013.

Sergio Marchionne, who serves as CEO of both Fiat and Chrysler, said earlier this month the trust wants upwards of $5 billion for its stake, about $2 billion more than Fiat is prepared to pay. The shares to be sold in the IPO, which represent about 16% of the Chrysler's total, are part of VEBA's stake.

Despite the filing it is possible the shares will never be sold to the public. There are reasons for both sides to come to the table and resolve their dispute prior to an offering. Marchionne is eager to combine Fiat and Chrysler, and a public ownership figures to greatly complicate that process. Outside investors could advocate a strategy other than combining with Fiat, or at least demand Fiat pay up for the stake or otherwise prolong the process of merging the two companies.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.99 0.00%
FB $102.01 0.00%
GOOG $682.40 0.00%
TSLA $151.04 0.00%
YHOO $27.04 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs