By Gilles Castonguay, Crain News Service
MILAN (July 31, 2014) — Fiat S.p.A.'s shareholders will likely approve the auto maker's merger with Chrysler Group L.L.C. when they meet in Italy for the last time on Friday, Aug. 1.
Industry watchers expect Fiat to win the two-thirds majority vote needed for a merger that will create the world's seventh largest auto maker because its biggest shareholder, Exor, the holding company of Fiat's founding family, owns an influential 30.04 percent stake.
A positive vote at the special shareholders meeting called by Fiat “is pretty much a done deal,” said a Milan-based industry analyst.
Proxy advisors, whose recommendations are usually followed by international investors, have issued different advice to shareholders. ISS and Frontis Governance recommend a “no” vote because Exor's voting power in the merged company could rise to as much as 46 percent, reducing minority shareholder rights. However, Glass Lewis said Fiat investors should vote in favor because the merger's benefits outweigh the concerns.
Failure to secure approval of the merger could complicate Fiat Chrysler's plans to list its stock in the U.S. and secure funds for its five-year business plan.
Fiat completed its buyout of Chrysler earlier this year and CEO Sergio Marchionne said on July 23 he was confident the merger would be approved. The merged auto maker will be registered in the Netherlands and called Fiat Chrysler Automobiles NV, or FCA. (Its U.S. entity will be Fiat Chrysler Automobiles.) The company aims to list its shares in New York by October to gain better access to financial markets while maintaining a secondary listing in Milan. FCA would have its tax domicile in London to benefit from lower taxes on dividend payments to its shareholders.