| FRANKFURT, April 23
FRANKFURT, April 23 Italian carmaker Fiat
could secure financing by May for a possible buyout of
the rest of Chrysler, two people familiar with the matter said
Fiat is in advanced talks with banks, which are expected to
conclude next month, on financing to buy the 41.5 percent of
Chrysler which is held by VEBA, the United Auto Workers'
retirees' healthcare trust, the sources said.
Fiat is looking to raise roughly 3 billion euros ($4
billion) in new financing, said one of the sources, and is
hoping to strike a deal with VEBA by early July.
Fiat's chief executive Sergio Marchionne wants to merge the
two carmakers to create the world's seventh-largest auto group,
tapping Chrysler's cash flow to offset Fiat's losses in Europe
and building economies of scale.
A hearing in a U.S. court on Thursday could shed light on
Chrysler's price tag, which is the subject of a legal battle
between Fiat and VEBA.
Earlier this month Marchionnne said the automaker may need
to raise capital in the medium- to long-term after the Chrysler
buy, adding Fiat had enough cash to avoid a capital increase for
the purchase itself.
But later the same day he told a group of reporters Fiat may
need to raise as much as 2.5-3 billion euros ($3.3-$3.9 bln) in
connection with the buyout, without elaborating. Fiat declined
Although Fiat has cash reserves of about 9 billion euros
($11.91 billion) as of December 31, in practice it would need to
raise finance to merge with Chrysler to maintain the new group's
VEBA's total 41.5 percent stake in Chrysler is worth an
estimated $3.5-$4 billion, according to analysts.
DUAL TRACK DEAL
In January VEBA said it would exercise its right to sell
part of its Chrysler stake in an initial public share offer
(IPO), and Chrysler asked banks to submit pitches for the
offering in April.
Bankers have been asked to prepare a "dual-track" sale
leading either to the flotation of Chrysler shares owned by
VEBA, or an agreed buyout of VEBA's stake by Fiat, people
familiar with the matter have said.
Marchionne has made no secret of his desire to merge the two
automakers and avoid an IPO, but has said he would be open to a
market listing if Fiat and VEBA could not reach a deal.
"The goal clearly is to resolve the matter this year," one
of the sources on Tuesday said, adding that IPO preparations
were already underway.
The U.S. court hearing this week could shed light on how far
apart the two sides are from an agreement on price, and possibly
provide the catalyst to start buyout talks and avoid an IPO,
the sources said.
At issue in the court dispute is the price Fiat should pay
for a part of VEBA's Chrysler stake which is subject to a call
option, with the two sides at odds over how to interpret a 2009
deal giving Fiat the right to buy 16.6 percent of Chrysler from
VEBA in five stages.
While no final ruling is expected on Thursday or in the
coming months comments from the judge may help bridge the gap
between the two positions and accelerate out-of-court talks on a
broader buyout deal, said one of the people familiar with the
"The April 25 hearing will likely give indication if there
is a room for a possible agreement," the person said.