When Fiat announced its $4.35 billion deal to gain full control of Chrysler Group LLC, market approval came quickly as Fiat’s shares spiked to over 2 year highs. The deal, which recently closed, is viewed as an effort by Fiat to bolster its global auto position.
This deal announcement has been long anticipated (despite talks of a Chrysler IPO), in particular based on Chrysler’s recent strong performance and the overall growth of U.S. and North American light vehicle sales. Chrysler has seen performance significantly improve with the growth of U.S. sales and this has helped Fiat to offset losses in its struggling European operations where its market share has declined. The deal lays the groundwork for further use of U.S. profits and cash to fund product expansion for Fiat in its underutilized Italian plants as well as the ability to take advantage of technology, manufacturing and engineering synergies between the two companies for its next generation products.
Fiat indicated it would fund the deal in cash, and Fiat-Chrysler CEO Sergio Marchionne recently told to the Italian newspaper La Repubblica that the a convertible bond may be used to fund investments after the deal is consummated. More is soon to come on the combination as Fiat plans to unveil its new financial strategy and new models in April of this year.