Bernstein Research Says The Sale Will Never Happen Anyway.
It’s not often a CEO has to deny talking down his own share offering, but Fiat-Chrysler’s Sergio Marchionne was never afraid to break the mould.
Earlier in the month Bernstein Research analyst Max Warburton, in a research note on Fiat Auto – “Chrysler – The IPO (initial public offering) That Will Never Happen”, reported that Marchionne said at a Bernstein conference that the 16.6 per cent stake in Chrysler being offered by the UAW Retiree Medical Benefits Trust wasn’t a great deal for investors.
“But he (Marchionne) argued that while he believed Chrysler had an attractive future, he did not believe investing via this particular IPO would be the most attractive for investors (implying investing via Fiat, or a future Fiat-Chrysler listing would be more the attractive),” Bernstein said.
This must have stirred up some action at the Securities and Exchange Commission in the U.S., which regulates share offerings, and doesn’t take kindly to anyone breaking the rules.
A couple of days later Fiat-Chrysler came up with this statement.
“The report mischaracterises Mr Marchionne’s presentation which was made at a Fiat investor meeting and does not accurately record his comments. None of Chrysler, Fiat or any of their officers have authorised any articles or recommendations with respect to any investment in Chrysler,” the statement said.
Fiat owns 58.5 per cent of Chrysler and wants the UAW Retiree Medical Benefits Trust’s 41.5 per cent stake.
But the two parties are arguing over the value of the remaining shares Fiat doesn’t own. Wall Street Journal columnist Holman W Jenkins Jr said the two sides are $2 billion apart on price. No date for the sale has been announced.
In theory, when the UAW sees how hopelessly unrealistic its price is when the shares are open to bidders in the market, the union will quickly agree to a price acceptable to Fiat.
Fiat already warned Chrysler when the share listing was filed that the IPO jeopardised future technology and design sharing between the two.
But Bernstein maintains the share offering will not happen.
“We assume the IPO never actually prices and completes. Instead we assume Fiat will head it off by buying the rest of Chrysler – but not before plenty of fees are paid to lawyers, bankers and paper companies – the IPO document is over 400 pages,” Warburton said.
“If any young bankers or lawyers working on the deal are reading this, here’s some advice: quit staying up all night to run spreadsheets and proof documents. Down tools now and go home. This deal is unlikely ever to happen,” Warburton said.