* Merger key to U.S. listing, capital raising
* Vote seals politically sensitive move of HQ from Italy
* Merger could still fail if enough execute exit rights
(Adds details on exit rights)
By Agnieszka Flak
TURIN, Italy, Aug 1 Fiat shareholders
approved the Italian carmaker's merger with its U.S. unit
Chrysler on Friday, paving the way for a U.S. listing which the
world's seventh-biggest auto group hopes will help fund an
ambitious turnaround plan.
Fiat Chief Executive Sergio Marchionne completed the full
buyout of Chrysler earlier this year and wanted to incorporate
the businesses as a Dutch-registered combine, Fiat Chrysler
Automobiles (FCA). The vote to create FCA was approved by the
required two-thirds majority of shareholders present.
Around 8 percent of all of Fiat's investors voted against
the merger and should enough of them exercise their rights to
sell out within two weeks, the merger could still fail.
Marchionne thinks the chances of the merger now failing are
slim and he is counting on the U.S. listing to help foot the
bill for a 48 billion euro ($64 billion) plan to grow net profit
five-fold and sales by 60 percent by 2018.
Marchionne helped rescue Chrysler in 2009 and turned the
U.S. firm into a key profit centre for Fiat, although quarterly
results released on Wednesday disappointed.
The creation of FCA will help Marchionne ease his reliance
on Europe and could convince investors that FCA can rival
General Motors and Ford Motor Co.
"With today's meeting begins the future of our company,"
Chairman John Elkann, the grandson of late Fiat patriarch Gianni
Agnelli, said at the start of the last shareholder meeting
likely to be held in Italy.
The merger plan had raised concerns it would tighten the
grip on the company by main shareholder Exor, the
holding company of the Agnelli family, via the creation of a
scheme to reward long-term investors.
FCA is expected to be headquartered in London and have its
tax domicile in Britain, Fiat has said, cementing a
politically-sensitive shift away from Italy, its home of the
past 115 years.
Fiat, considered by many as an Italian national champion, is
one of the country's main employers, with 62,000 staff there.
Many are still on temporary layoff schemes as plants have
been running at low capacity after car sales in Italy and Europe
fell to historic lows and are only slowly being ramped up.
Italian labour unions and politicians have been concerned
about potential job cuts, but Fiat said the merger would have no
impact on jobs in Italy or elsewhere.
Investors will receive one FCA share for each Fiat share
they hold. Most will also be eligible for special voting shares.
Investors who voted against the merger are entitled to cash
exit rights of 7.727 euros per share. Should the total sum that
needs to be paid for those rights to shareholders and creditors
exceed 500 million euros, the merger will fail, Fiat has said.
Marchionne said on Friday he and Elkann were confident that
many of those who voted against the merger on Friday were likely
to remain shareholders.
Even if enough sold out, Fiat said their shares would first
be offered to existing shareholders and if those investors took
up the offer the shares would no longer count as exit shares.
The outcome of the operation will be known by early October.
Marchionne said he will not attempt a U.S. listing for Fiat
alone but only once FCA had been created.
The creation of FCA will not lead to significant operational
cost savings or synergies, Fiat has said, and failure to get the
final OK for the tie-up would have little operational impact.
However, a rejection would likely "prove embarrassing for
Marchionne and may result in higher financing costs going
forward," Arndt Ellinghorst, a London-based analyst at
investment researchers ISI Group, said in a note.
Proxy advisory firms ISS and smaller peer Frontis Governance
advised against the merger, saying it would reduce shareholder
rights and boost Exor's influence, while Glass Lewis, said the
move's benefits outweighed the risks and on balance it was "in
the best interests of shareholders".
Exor owns 30 percent of Fiat, but its voting power could
rise to as much as 46 percent via the loyalty scheme put in
place as part of the merger to reward long-term investors.
Elkann confirmed his family's commitment to Fiat, "even more
so now that there are big opportunities on the horizon", denying
rumours that the Agnellis would sell down their stake.
($1 = 0.7468 Euros)
(Editing by Mark Potter and Elaine Hardcastle)