Italian automaker Fiat SpA on New Year's Day announced it had come to an agreement to purchase the remaining shares of Chrysler for $3.65 billion, meaning the Detroit-based automaker is now wholly owned by a European entity.
Fiat already owns 58.5 percent of Chrysler’s shares, and with the latest announcement it will acquire the remaining 41.5 percent held by a United Auto Workers union trust fund. The fund is used to pay for retirees’ health care bills.
The Italian automaker has agreed to make an initial payment of $1.9 billion and will pay the remaining $1.75 billion when the deal is finalized.
Further sweetening the deal, Fiat has also agreed to pay an additional $700 million to the UAW fund.
The deal will be finalized sometime around Jan. 20, Chrysler said in a statement.
Fiat’s CEO, Sergio Marchionne, has long sought to acquire the UAW’s share of Chrysler. Without a merger of the two companies, Fiat can’t spend any of Chrysler’s cash.
"The unified ownership structure will now allow us to fully execute our vision of creating a global automaker that is truly unique in terms of mix of experience, perspective and know-how, a solid and open organization," Marchionne said in a statement.
Marchionne added that the deal is a “defining moments that go down in the history books."
There was talk earlier of the UAW taking its stake public, which initial estimates valued at roughly $5.6 billion. Although it was eager to settle the issue without an IPO, Fiat filed papers in September for the offering. Also, to make sure they had their bases covered, the Italian automaker took the issue to court to seek a judgment on the share price, but the trial date was pushed to September.
Investors were ecstatic with Fiat’s non-IPO deal, pushing the company’s shares up 12 percent on the Milan exchange.
The stock was up by as much as 15.8 percent earlier in the day.
Fiat, which brought Chrysler out of bankruptcy in 2009, has a total of 215,000 employees, almost a third of which are in Italy.
The Auburn Hills, Mich., automaker earned $464 million in the third quarter on U.S. sales of the Ram pickup and Jeep Grand Cherokee, its ninth-straight profitable quarter. The results boosted Fiat, which earned $260 million in the quarter. Without Chrysler's contribution, Fiat would have lost $340 million.
Fiat has struggled recently with sales of its own cars. In October, it lowered its 2013 earnings targets amid continued weakness in the European economy and car markets and lower sales in Brazil. Without Chrysler, Fiat would have lost significantly more in the third quarter of 2013.
The Associated Press contributed to this report.
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