October 10, 2013 4:16 pm

Fiat-Chrysler’s Sergio Marchionne denies talking down IPO

When was the last time a chief executive had to deny he had discouraged investors from buying into his own company?

The increasingly complex and bitter battle over the future of Chrysler took a farcical turn on Thursday when chief executive Sergio Marchionne denied reports that he had warned off potential investors in the US carmaker’s forthcoming IPO.

Mr Marchionne, also chief executive of Chrysler’s majority owner Fiat, wants the Italian carmaker to buy its US partner outright, but has been forced into filing for an IPO he does not want by a minority shareholder that has refused to sell up.

A wily dealmaker who has frequently stated his misgivings of an IPO, Mr Marchionne was quoted in a research report saying that he believed participating in the US carmaker’s listing was not the most attractive route for investors.

“[Mr Marchionne] argued that while he believed Chrysler had an attractive future, he did not believe investing via this partial IPO would be the most attractive route for investors (implying investing via Fiat, or a future Fiat-Chrysler listing, would be more attractive),” Bernstein Research wrote in a recent note titled ‘The IPO That Will Never Happen’.

Fiat-Chrysler on Thursday denied the assertion.

“The report mischaracterises Mr Marchionne’s presentation which was made at a Fiat investor meeting and does not accurately record his comments,” the company said in a statement. “None of Chrysler, Fiat or any of their officers have authorised any articles or recommendations with respect to any investment in Chrysler.”

Fiat rescued Chrysler from bankruptcy in 2009 in exchange for a stake in the company that has steadily increased as the US carmaker’s fortunes have recovered.

But a union healthcare trust that owns the remainder of Chrysler has refused to sell to Fiat, disputing the value of its shares. Instead it has demanded 16.6 per cent of the company that it holds be floated.

At the centre of the saga is Mr Marchionne, whose legacy rides on his attempt to combine the two carmakers into a bigger beast to take on industry giants such as Toyota, General Motors and Volkswagen.

But he has been thrust into a position where he is required to drum up support for an IPO that he does not want to happen.

In documents filed for the listing last month, Fiat warned Chrysler that the IPO had meant it is reconsidering the terms for future technology and design sharing between the two carmakers, threatening potential money-saving synergies.

The prospectus gave no date for the float. Mr Marchionne told the Financial Times this month that the listing could take place this year, but was more likely to take place in the first quarter of 2014.

“We have got to distinguish between my obligations as the CEO of Chrysler and my interests as the CEO of Fiat. I have made it clear that I think these two organisations need to come together,” Mr Marchionne told the FT in a recent interview. “But my obligation is to take this thing public and make it as successful as we can.”

Fiat holds 58.5 per cent of Chrysler, and the VEBA healthcare trust owns 24.9 per cent. The remaining 16.6 per cent of the carmaker is in options held by VEBA that Fiat has the options to buy in tranches. The value of these tranches are subject to a separate legal case being pursued in a Delaware court.

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