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The Wall Street Journal May 30th 2012
ROME—Fiat Industrial said Wednesday it intends to merge itself with CNH Global NV, a U.S.-based agricultural-to-construction equipment business it mostly owns already, in a bid to boost the combined firm’s access to capital markets.
Fiat Industrial said it has invited CNH’s board to “explore the benefits” of such a deal, which it said would have no impact on current head count and operations and would lead to a Dutch-based holding company whose shares would trade primarily on the New York Stock Exchange, with a secondary listing in Europe.
The proposed deal “is a natural extension of the process of simplification of the Fiat world,” Fiat Industrial Chairman Sergio Marchionne said, noting Fiat Industrial had been demerged from car maker Fiat SpA in 2010. Mr. Marchionne is also chief executive of Fiat and Chrysler Group LLC, the U.S. car maker Fiat controls.
The dual listing of Fiat Industrial and CNH, which has a meager share float, was “unappealing” and impeded “efforts to reap the benefits of positioning in the capital markets,” Mr. Marchionne said.
The Italian company said it had no intention to make a cash offer for the 12% of CNH shares it doesn’t already own. Its proposal would pool the shares in Fiat Industrial and CNH into the new company at their current market prices. The current dual listing has proved unattractive to investors, Mr. Marchionne said.
At current valuations, Fiat Industrial has a market capitalization of €11.1 billion ($13.88 billion), more than half of which is represented by its stake in CNH, which has a market capitalization of $9.9 billion.
Merging the two companies will yield “significant benefits to all shareholders of the two companies” and bolster capital-market visibility of the third-largest capital goods business in the world and “significantly increase its strategic flexibility,” said John Elkann, chairman and chief executive of Exor SpA, the Agnelli family holding company that is Fiat Industrial’s largest shareholder.
While executives had long flagged their intention to simplify the relationship between Fiat Industrial and CNH, the explicit reference to the role of capital markets in the decision is likely to steer investor attention to the relationship between Fiat and Chrysler. The Italian car maker owns almost 60% of Chrysler, which is providing the lion’s share of its cash flow as the U.S. auto market revives.
“With Fiat we are staying and investing in Italy but it’s not an obligation,” Italian newspapers quoted Mr. Elkann as saying, at Exor’s shareholder assembly held in the Juventus soccer stadium in Turin on Monday.
A maximum of €250 million in cash outlay might be required to buy out Fiat Industrial shareholders who have rights under Italian law to withdraw from the deal, the Turin-based company said.
The combination would pool the resources and products of CNH, which makes agricultural and construction equipment under the Case and New Holland brands, and Fiat Industrial, which makes Iveco trucks among other products.
CNH has enjoyed booming business, buoyed by strong conditions in global agricultural markets, while Fiat Industrial’s Iveco trucks unit has suffered from the economic weakness in southern Europe, although it has remained profitable.
ik vindt het zo leuk dat het hoofdkantoor in nederland is voor CNH, nu Fiat nog.
New Holland’s claim to the world’s biggest combine comes from the CR9090, which currently holds the Guinness World Record for the most grain harvested.
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