Final Merger Likely Set for Fiat and CNH Global
After some back and forth between the two companies last month, CEO Sergio Marchionne of Fiat Industrial SpA (OTC: FIATY) has won enough support for an improved bid on CNH Global NV (NYSE: CNH). Fiat already owned 88 percent of CNH, but the attributes of the proposed final merger were originally seen as unfavorable to CNH.
After a renegotiated deal that included raising the offer by 26 percent, CNH agreed to the merger on November 19th. Under the terms of the new deal, each share of CNH stock will be worth 3.828 shares of the new entity. Fiat is also offering a $10 per share special dividend for CNH owners in a deal that CNH now views favorably.
The merger is expected to be finalized on November 25th. This merger will make Marchionne's company the third-largest producer of capital equipment and the newly-combined group will shift its listing from Milan to New York.
Fiat Industrial stock was up about eight cents (one percent) at the time of this writing. The stock has gained 28 percent this year, valued at about €10.4 billion on the Milan exchange. Wednesday, CNH closed down 4 cents at $47.50 in New York trading. At the time of this writing, the stock had risen approximately $2.00 (4.3 percent). The tractor maker is valued at $11.4 billion.
The remaining 12 percent of CNH is worth $1.37 billion, and the special dividend will be worth approximately $278 million total.
Fiat is reorganizing due to the debt crisis in Europe. Its Iveco truck unit announced it will shut down five European plants as part of a plan to move production out of the troubled euro region.
The merger is expected to allow a more streamlined capital structure and make growth for the merged entity more efficient.
In a statement Friday, Chairman Marchionne said “It is gratifying for both companies to take this step, which should enable CNH to put in place plans to pay the extraordinary dividend to CNH minority shareholders by the end of this year.”
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