Fiat is in talks for as much as US$10 billion in financing from a pool of banks to buy the Chrysler stake it doesn't own and refinance the two firms' debt, people familiar with the matter said.
The banks, which include Bank of America, Deutsche Bank, Goldman Sachs and BNP Paribas, are discussing lending the Italian firm the money to buy the 41.5 per cent of the US carmaker held by the United Auto Workers' retiree health care trust, said the people, who asked not to be identified because the discussions are private. Other banks could also take part in the financing, one of the people said.
Chief executive Sergio Marchionne, who runs Fiat and Chrysler, has spent the past four years remaking the two regional carmakers into one global carmaker that can better compete with Toyota and General Motors. A full combination of the two would create a group with the mass-market Fiat, Chrysler, Jeep and Dodge brands, along with the Maserati and Ferrari high-end marques.
"The merger is the right choice for Marchionne and the only possible option to avoid Fiat being marginalised or bought by a competitor in the medium term," said Emanuele Vizzini, chief investment officer of Investitori in Milan. "I see it as likely that they will get favourable financing by the end of the summer and then list in the US."
Turin-based Fiat, which has accumulated a 58.5 per cent holding since taking control of Chrysler in 2009, aimed to complete the purchase of the remaining stake by the end of the summer, the people said.
Fiat will probably wait for the decision in a legal dispute between the carmaker and the health care trust over the value of its Chrysler stake before moving forward, chairman John Elkann told reporters yesterday in Turin.
The firm has received verbal agreements at this point from some of the banks, while no deal has been signed, the people said.
Fiat is planning a two-step deal, with the Italian carmaker first buying the stake and later refinancing the debt of both companies at lower interest rates, the people said. It may pay as much as US$3.5 billion for the rest of Chrysler, UBS estimates.
"It seems discussions are progressing on Fiat's plan to buy Chrysler, and Marchionne is getting closer to his plan of merging the two carmakers," said UBS analyst Philippe Houchois.