Chrysler to push back IPO timing on tax issue: sources

Mon Nov 25, 2013 3:48pm EST

A Chrysler logo is seen on the wheel of a new car at a dealership in Vienna, Virginia April 26, 2012. REUTERS/Kevin Lamarque

A Chrysler logo is seen on the wheel of a new car at a dealership in Vienna, Virginia April 26, 2012.

Credit: Reuters/Kevin Lamarque

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(Reuters) - Chrysler Group LLC, the No. 3 U.S. automaker, has abandoned plans for an initial public offering this year so it can sort out a U.S. tax issue, according to two sources familiar with the process.

An IPO is not likely until 2014, one of the people said, adding that underwriters were notified of the decision late last week. Fiat said Monday that it would "not be practicable" to complete a Chrysler IPO this year.

Chrysler, which is majority owned by Italian automaker Fiat SpA FIA.MI, was previously looking to kick off its IPO road show in early December.

But the timeline hit a snag due to complications involving the conversion of Chrysler from a limited liability company, or LLC, to a C corporation, the people said.

Most public companies are C corporations, and in Chrysler's case, the conversion to this structure would likely mean additional taxes, Peter Bible, chief risk officer of accounting firm EisnerAmper, said.

As a limited liability corporation, Chrysler has few shareholders and passes losses and the responsibility of paying taxes to its owner. But a C corporation pays its own taxes, can have an unlimited number of shareholders and also bears a greater tax burden.

Chrysler could not be immediately reached for comment. The people declined to be named because they were discussing confidential details.

The delay is the latest twist in Chief Executive Sergio Marchionne's effort to execute the next stage of the Fiat-Chrysler turnaround. Marchionne has led both automakers since Chrysler's 2009 government funded bankruptcy restructuring.

Marchionne wants to formally merge the two companies and form the world's seventh-largest auto group. He has repeatedly said he would prefer to avoid an IPO for the time being.

But Chrysler was forced to file IPO paperwork in late September after it failed to reach a reach a buyout deal with Chrysler's minority shareholder, a retiree healthcare trust tied to the United Auto Workers union.

JPMorgan Chase & Co (JPM.N) and Bank of America Merrill Lynch (BAC.N) are leading the IPO, with additional bookrunners including Barclays Plc (BARC.L), Goldman Sachs Group (GS.N), Morgan Stanley (MS.N) and UBS AG UBSN.VX.

(Reporting by Olivia Oran in New York and Deepa Seetharaman in Detroit; additional reporting by Bernie Woodall in Detroit)

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