Fiat expects to know by the end of March what a share of Chrysler is worth, a milestone that could accelerate an initial public offering of the Auburn Hills automaker's stock, according to an analyst briefed on the matter Friday.
Fiat owns 58.5% of Chrysler and has offered to buy another 6.6% from the UAW Retiree Medical Benefits Trust, which owns the remainder of Chrysler. But the Italian automaker sued the trust over the value of those additional shares. Delaware Chancery Court is expected to decide in the next six weeks, Max Warburton of Bernstein Research wrote in a report Monday.
Fiat offered $155 million for 54,154 shares last July, then offered $198 million for an additional 3.3% stake earlier this year. The UAW trust claims the shares are worth more than twice as much.
"An IPO may be the most effective way to find a price for the rest of Chrysler," Warburton wrote. He attended a meeting last week in New York with Chrysler and Fiat CEO Sergio Marchionne and other analysts and investors.
Chrysler hasn't been publicly traded since 1998, when it was acquired by Daimler.
Some analysts have questioned whether Fiat, which is struggling in Europe, has the financial strength to buy all of the UAW's stake.
Marchionne has said Fiat's cash reserve of $14.7 billion is enough to support Fiat's restructuring plan in Europe and a merger with Chrysler.
Under the terms of the U.S. government's 2009 rescue of Chrysler, Fiat has the right to buy up to 16.6% of Chrysler's shares from the UAW trust through 2016.
If the Delaware judge rules in Fiat's favor, Warburton said, the UAW trust will push for an initial public offering because it needs cash to pay for the medical care of retired UAW workers.
If the court decides Chrysler's shares are worth as much as the union's trust contends, then Fiat might want to sell more shares to generate more cash.
Both sides need cash. The trust, also known as a Voluntary Employee Beneficiary Association (VEBA), is facing claims from retirees who are getting older. Fiat, in the middle of a costly reorganization in Europe, needs cash to buy more of Chrysler and develop new vehicles.
"The market is going to determine the value of the VEBA's interest. It's not going to be me," Marchionne said last week in a radio interview.
On Jan. 30, when Fiat reported year-end earnings, Marchionne said the company has begun preparations for Chrysler's public stock offering.
"It is my objective, regardless of how we get there, for Fiat and Chrysler to effectively end up being one combined corporate entity," he said.
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