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Fiat increases its
interest in Chrysler
29th May, 2011
Who owns
Chrysler?
25th January, 2011
24th July, 2011
Fiat has once again increased its shareholding in Chrysler
Group LLC.
On 21st July, 2011, Fiat acquired the 1.5% fully diluted ownership interest(1) held in Chrysler
Group LLC by the Canadian government. The consideration for such interest was US$125 million.
Fiat and the United States Department of the Treasury (“UST”) also, on 21st July, 2011, completed Fiat’s
purchase of the 6% fully diluted ownership interest(2) held in Chrysler by UST for a price of US$500
million, as contemplated by the agreements entered into in early June.
Under those agreements, UST also assigned to Fiat the UST’s rights under the Equity Recapture Agreement
entered into between UST and VEBA on 10th June, 2009(3), in exchange for cash in an amount of US$75
million, US$15 million of which was paid to Canada in accordance with arrangements between the UST and
Canada.
After these purchases, Fiat holds a 53.5% fully diluted equity interest in Chrysler (after giving effect
to the dilution of the Class A Interests held by all members (including Fiat) arising from the occurrence of
the final “Class B Event” contemplated by the LLC Operating Agreement of Chrysler).
Following the occurrence of the final Class B Event, which is expected later this year, Fiat will hold
58.5% of the outstanding equity in Chrysler(4).
NOTE (legal mumbo jumbo):
1 This percentage gives effect to the dilution of the Class A Interests held by all members (including
Fiat) arising from the occurrence of the final “Class B Event” contemplated by the LLC Operating Agreement of
Chrysler (the “Ecological Event”). The interest without giving effect to the final Class B Event is 1.624%,
which will be diluted to 1.508% upon the occurrence of the Ecological Event.
2 The interest without giving effect to the Ecological Event is 6.495%, which will be diluted to
6.031% upon the occurrence of the Ecological Event.
3 Under the Equity Recapture Agreement, the holder is entitled to the economic benefits associated
with the Chrysler ownership interests held by VEBA above a specified threshold (equal to $4.25 billion plus 9
per cent per annum compounded annually from 1st January, 2010) and any proceeds to VEBA from its Chrysler
membership interests that exceed the specified threshold are to be paid over to the holder along with any
membership interests retained at the time in excess of that threshold and the holder may terminate the Equity
Recapture Agreement by purchasing the membership interests retained by VEBA at a price equal to the
then-current specified threshold less any proceeds previously received by VEBA from its membership interests
in Chrysler. The rights under the Equity Recapture Agreement do not affect Fiat’s rights under the VEBA Call
Option. The Equity Recapture Agreement is available at the Internet site of the United States Department of
Treasury and as an Exhibit to Chrysler’s filings with the Securities Exchange Commission.
4 Fiat also has the right to purchase an additional 5% interest in Chrysler (subject to dilution
of any Class A Interests, including those then held by Fiat) in substitution of the increase associated with
the Ecological Event (the “Alternative Call Option”). Fiat has an option to purchase 40% of the VEBA’s
original ownership interest in Chrysler (the “Covered Interest”), which option may be exercised from 1st July,
2012 until 30th June, 2016, in amounts not to exceed in any six-month period, 20% of the Covered Interest (the
“VEBA Call Option”). The exercise price for both of these options is determined before an IPO occurs using a
market multiple (average of multiples of certain automotive companies, not to exceed Fiat’s multiple) applied
to Chrysler’s reported EBITDA for the most recent four quarters less net industrial debt, and if an IPO has
occurred, based on market price of common stock.
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