Fiat-CNH Merger Imminent?

Posted on November 26, 2012

The Special Committee of the Board of Directors of CNH Global NV announced that it has recommended the merger agreement entered into today between CNH and Fiat Industrial S.p.A. The terms of the transaction are as follows:

- FI and CNH will merge into a newly-formed company (NewCo) organized in the Netherlands.

- CNH shareholders will receive 3.828 NewCo shares for each CNH share and FI shareholders will receive one NewCo share for each FI share. CNH shareholders will also receive a special cash dividend of $10 per CNH share to be paid to CNH shareholders prior to December 31, to the extent possible, and in any event prior to the closing of the merger; the special cash dividend to be received by FI on its 88% of the CNH shares will be deferred and paid only in the event that the merger agreement is terminated.

- NewCo would adopt a loyalty voting structure. Under the loyalty voting structure, shareholders that participate in the shareholders' meeting of FI and CNH to consider the transaction and continue to hold their shares until closing, regardless of how they vote, could elect to have the shares they receive be entitled to two votes per share until those shares are transferred. After the closing, shareholders with single-vote shares of NewCo would be entitled to "earn" a double vote by holding the shares for at least three years.

- The shares of NewCo will be listed on the NYSE at closing with a listing on Borsa Italiana promptly following closing.

In a statement, the Special Committee said it gave careful consideration to the enhanced offer submitted by FI on November 19 and determined that the terms are fair and in the best interest of CNH and its stakeholders. Based upon FI's closing stock price on November 23, 2012, the total consideration represents a premium of more than 23% over FI's initial proposal of 3.828 NewCo shares for each CNH share. 

Resulting in the formation of one of the largest capital goods companies in the world, the combination will have a number of industrial and operational benefits for CNH and its stakeholders, the Special Committee said. These include the ability to more effectively utilize the financial services and treasury operations of the broader group and achieve greater scale in emerging markets as well as guaranteeing access to a stable supply of engine know-how and industrial capabilities.

The transaction is expected to be completed in the second quarter of 2013, subject to customary regulatory approvals and limited closing conditions. 

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