Chrysler Buyout to Cost Fiat More than $5 Billion

Fiat SpA is being forced to spend more than $5 billion to acquire the 41.5% of Chrysler Group LLC it doesn't already own, Reuters reports.

The news agency cites unnamed sources who point out that the retiree healthcare trust that owns that stake is legally obliged to maximize the value of its holding. That cap currently is more than $5 billion and rising under a formula set during Chrysler's bankruptcy four years ago.

The formula capped the value of the stake held by the UAW Retiree Medical Benefits Trust at $4.25 billion in 2009. But the calculation also includes a compounded interest rate of 9% per year, according to Reuters.

Fiat has been allowed since mid-2012 to buy the trust's stake in 3.3% chunks every six months. But the two sides have been stuck in a legal battle over the value of those shares, thus stalling three attempted purchases to date.

Meanwhile, Fiat-Chrysler CEO Sergio Marchionne is eager to resolve the dispute, complete the acquisition and fully merge the two companies. But Reuter's sources say the trust sees no reason to hurry the sale because Chrysler's value continues to grow, thus increasing the worth of its stake.

If the two sides cannot agree on a price, the trust may sell about one-fifth of its stake through an initial public offering and divest the balance in stages, one source tells Reuters.