* Offer is for 12 pct of the company it does not own
* Worth $1.5 bln in cash and shares
* New offer includes $10 per share cash dividend
* Fiat Industrial stock up, analysts positive
By Jennifer Clark
MILAN, Nov 22 Italy's Fiat Industrial
has won over the board of its U.S. tractor and construction
machinery unit CNH with an improved $1.5 billion bid
that will create the world's third-largest capital goods group
The new offer, which added an approximate $300 million cash
dividend to a previous all-share bid, will allow Fiat Industrial
to buy the 12 percent of CNH it doesn't already own to fully
capture the U.S. business's higher profits.
It also hopes the unified firm will benefit from the higher
valuation investors ascribe to CNH than to Fiat Industrial.
Strong U.S. sales of agricultural equipment mean CNH's Case
and New Holland brands accounted for about two thirds of the
combined group's revenue to Sept. 30, and nearly 80 percent of
its 1.6 billion euros trading profit.
The U.S. contributed twice as much to the combined group's
trading profit in 2011 as Europe did.
That means investors place a higher value on CNH, whose
market capitalisation and debt taken as a multiple of core
profit - or EV/EBITDA - is 10.8 versus 9.3 for Fiat Industrial,
according to Thomson Reuters data.
While seen as more valuable than Fiat Industrial, CNH
currently trades at a lower valuation multiple than its U.S.
peers Caterpillar and John Deere because of a
lack of stock liquidity.
Some analysts said on Thursday a U.S. listing for the group
should allow it to close these valuation discounts.
U.S.-listed CNH's board had balked at the all-paper,
no-premium offer made on May 30, as minority investors in the
United States often obtain what is in effect a significant
Fiat Industrial's latest offer included the addition of a
$10 cash dividend per CNH share.
At 1240 GMT, Fiat Industrial's shares were up 1.4 percent at
8.515 euros. CNH's shares are listed in New York, where they
closed at $47.50 on Wednesday.
The two groups will be merged into a newly-formed company in
which CNH shareholders will receive 3.828 shares, and Fiat
Industrial shareholders one share.
The new company - which has not been named yet - will move
its main listing to New York, keeping Milan as a secondary
listing. Fiat Industrial was spun off from sister company Fiat
in 2011 and is controlled by Italy's Agnelli family.
Fiat Industrial Chairman Sergio Marchionne said the
extraordinary dividend to CNH minority shareholders should be
paid by the end of this year.
Marchionne said on May 30 he saw 140-150 million euros of
financial savings from the deal in reduced borrowing costs.
The two companies are already being managed as one.
On Nov. 12, Fiat Industrial said it created a group
executive council (GEC) to make decisions on operating
performance and key strategic decisions.
CNH CEO and President Richard Tobin was named chief
operating officer, making him the No. 2 executive in the GEC
under Chairman Sergio Marchionne.