* ISS says merger would decrease shareholder rights
* Loyalty scheme seen benefiting top shareholder Exor
* Shareholders to vote on cross-border merger on Aug. 1
(Adds details, context, quotes)
MILAN, July 23 Proxy advisor ISS has recommended
that Fiat investors vote against a cross-border merger
of the Italian carmaker and its U.S. unit Chrysler at a meeting
on Aug. 1, saying it would reduce shareholder rights.
Fiat completed the buyout of Chrysler earlier this year and
is hoping to incorporate the two into Dutch-registered Fiat
Chrysler Automobiles (FCA) to boost the world's seventh-largest
carmaker's appeal with international investors and to pave the
way for a U.S. listing planned for October this year.
"Despite the potential benefits of a NYSE-listing in
attracting new investors, (the merger) would decrease
shareholder rights," ISS said in its recommendation document
seen by Reuters.
Fiat CEO Sergio Marchionne said earlier on Wednesday he was
confident that the merger would be approved.
International investors normally follow recommendations of
big proxy advisors. The advice from ISS could weaken Fiat's
chances of securing the two thirds majority it needs to get the
A failure to secure approval to the cross-border merger
could complicate the group's plans to list in the United States
and secure funds for its ambitious five-year business plan.
The merged FCA is expected to be headquartered in London and
have its tax domicile in Britain, Fiat has said.
ISS also raised concerns that the merger would tighten the
grip on the company of holding group Exor.
Exor controls Fiat Chrysler via a 30 percent stake, but its
voting power could rise to as much as 46 percent through a
loyalty scheme put in place as part of the merger to reward
Smaller proxy advisor Frontis Governance has made the same
recommendation against the merger, citing unequal treatment of
shareholders and the unfair loyalty scheme, its founder Sergio
"The idea of a second voting share is like a gift to Exor,"
(Reporting by Agnieszka Flak; Editing by Elaine Hardcastle)