Marchionne Says Chrysler Could Begin IPO Process This Week

Fiat-Chrysler CEO Sergio Marchionne tells the Financial Times that Chrysler Group LLC intends to file documents this week that would permit an initial public offering by the union retiree healthcare trust that owns 41.5% of the company.

Fiat wants to buy the trust's stake and merge the two companies quickly. But the two sides have been locked in a slow-moving court battle over share value that may not go to trial until 2015.

Fiat has estimated Chrysler's value at $4.2 billion (€3.2 billion). The trust puts the company's worth at $10.3 billion (€7.7 billion).

Both parties agree that allowing the trust to launch an IPO for a portion of its holding would quickly determine a share value. But Chrysler regards an IPO as a last resort. Analysts tell Reuters it would be in the company's best interest to settle on a share price before a public offering.

The trust has no interest in being a long-term investor in Chrysler. But it also has a fiduciary obligation to maximize the return on its holding. Under a formula worked out in Chrysler's bankruptcy agreement, the maximum potential value of the trust's equity is more than $5 billion (€3.8 billion), according to Reuters. Fiat is offering roughly half that amount.

The trust exercised its right in January to demand that 16.6% of Chrysler's stock be sold publicly. Marchionne says a listing could occur before the end of 2013, but he considers an offering early next year more likely.

Reuters says the trust is permitted by Chrysler's bankruptcy agreement to sell as much as 25% of the company in an IPO. Fiat is allowed to buy the balance at a rate of about 3.2% every six months assuming the company and the trust can agree on a price.