Fiat board makes Chrysler merger official, approves $5.4B bond sale

Fiat's board of directors has officially approved the merger plan that will see the conglomerate's automotive operations merged with Chrysler into the new Fiat Chrysler Automobiles.

The plan essentially provides a road map for the structure of the new company. It includes provisions for Fiat shareholders – one Fiat share will translate to one share of FCA common stock. The new company will also include a loyalty voting structure, which will provide for shareholders of Fiat stock or those that have held FCA stock for at least three years. According to the plan, these shareholders would see their voting power double, with two votes for every share of FCA's common stock. The overall merger plan still needs to be approved by the company's shareholders.

In other Fiat-related news, the company's board has announced a bond issuance of four billion euro ($5.4 billion). The new bonds should provide the company with a degree of flexibility in refinancing debts associated with the merger plan.

We've included the press releases for both announcements below. Have a look.
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Fiat S.p.A. approves merger plan for the formation of Fiat Chrysler Automobiles

The Board of Directors of Fiat S.p.A. ("Fiat") announced today that it has approved the cross border merger terms ("merger plan") governing the merger of Fiat into its wholly owned subsidiary Fiat Investments N.V. This subsidiary, which is organized in the Netherlands, will be renamed Fiat Chrysler Automobiles N.V. ("FCA") upon completion of the merger. Following the merger, FCA will become the holding company for the group.

Today's approval is a further step in the reorganization plan announced on January 29, 2014 following Fiat's acquisition of the remaining equity interest in Chrysler Group LLC. The reorganization, which includes the merger plan, is designed to establish for FCA a corporate, investment and capital markets profile appropriate for the new make-up of the group resulting from the full integration of Fiat and Chrysler.

Under the merger plan, Fiat shareholders will receive one FCA common share for each Fiat ordinary share they hold. The FCA common shares will be listed on the New York Stock Exchange (NYSE) and are expected to be listed on the Mercato Telematico Azionario (MTA) in Milan.

FCA will also adopt a loyalty voting structure designed to foster the development and continued involvement of a supportive long-term shareholder base, by allowing shareholders participating in the merger and new shareholders who hold FCA shares continuously for a three-year period to effectively have two votes for each FCA common share that they hold. The loyalty voting structure is designed to foster a stable shareholder base and reward long-term investment in the company by encouraging investment by shareholders whose objectives are aligned with the group's long-term strategic interests. The loyalty voting structure is also expected to provide additional strategic flexibility for the group.

The pre-merger shareholders of Fiat will hold essentially the same percentage of FCA common shares as of Fiat ordinary shares held before the merger (subject to the exercise of cash exit rights). The loyalty voting structure may affect a particular shareholder's voting interest in FCA which will depend on the extent to which the shareholder and other shareholders participate in the loyalty voting structure.

The merger plan will be submitted for approval to the Fiat shareholders at an extraordinary general meeting that is expected to be held in the third quarter of 2014 following completion of required corporate and regulatory steps, including registration with the U.S. Securities and Exchange Commission. A U.S. prospectus and an Italian information document (for the purposes of the Fiat extraordinary general meeting) will be made available to shareholders ahead of the vote to approve the merger plan.

Fiat shareholders who do not vote in favor of the merger will be entitled to exercise a recesso right (cash withdrawal right) in accordance with Italian laws and regulations. The exercise of the recesso right by Fiat shareholders is conditional upon the merger becoming effective. Further details in connection with the exercise of the recesso right will be provided to Fiat shareholders in accordance with the applicable laws and regulations.

The transaction will be subject to limited closing conditions, including listing on the NYSE and a €500 million cap on the amount of cash, if any, required to be paid in respect of the exercise of recesso rights by Fiat shareholders and opposition rights by creditors.

The transaction is expected to be completed by the end of the year.

Fiat approves bond issuances

The Board of Directors of Fiat met today and approved the issuance of one or more bonds, for a total amount of up to 4 billion euros - or equivalent amount in other currencies - to be placed with institutional investors.

Bonds may be issued in one or more tranches, also through controlled companies and guaranteed by Fiat S.p.A., on or before December 31, 2015, subject to market conditions.

Such issuances are designed to manage the consolidated debt of the Group especially in view of some of the older bond issuances coming due between now and the end of 2015.

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