Fiat shares surge on Chrysler merger

Rome: Shares in Italian car giant Fiat soared on Thursday after it announced it would take full control of Chrysler in an historic $3.65 billion (€2.66 billion) deal.

Fiat stock jumped 15.8 per cent at the opening to €6.88 before slipping back slightly to €6.70 at around 0900 GMT.

The complex deal announced by Fiat on Wednesday paves the way for a full merger that will create a new global auto giant.

Fiat said the long-awaited agreement with its US partner included a $1.75 billion cash payment for the 41 per cent stake that has been held by the VEBA fund of the US auto worker’s union UAW since Chrysler’s bankruptcy procedure.

Fiat chief executive Sergio Marchionne, who is also the CEO of Chrysler, said in a statement from the company’s headquarters in Turin in northern Italy that the transaction would “go down in the history books”.

Unified ownership structure

“The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique,” Marchionne was quoted as saying.

Fiat said it expected the deal to be wrapped up by January 20, completing a process that began in 2009 with the start of Fiat’s partnership with Chrysler following the storm of the global economic crisis and the plunge in US car sales.

“The costs and financing... of this deal are more favourable to Fiat than the market expected, and the deal successfully secures Fiat’s operational and financial future,” Max Warburton, a senior analyst at Bernstein Research, told Dow Jones Newswires.

Fiat originally took a 20-percent stake in the third largest US automaker as part of the company’s bankruptcy.

What was originally seen as a risky bet for Fiat — the German automaker Daimler had failed to turn around Chrysler — has paid off handsomely as Chrysler’s sales are now booming after decades of turbulence and decline.

Chrysler’s profits have been keeping Fiat buoyant in recent years amidst a deep downturn in Europe, and Marchionne has been steadily expanding Fiat’s stake in Chrysler.

Marchionne’s ambitious goal is to create a new global player in the auto industry with the capital and volume to compete with the likes of Toyota and General Motors.