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Fiat Industrial Ups Its Offer for CNH

By: Gilles Castonguay and Bob Tita,
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MILAN, November 19, 2012 — Italy's Fiat Industrial SpA sweetened its offer to buy out minority shareholders of its U.S. farm and construction-equipment subsidiary, CNH Global NV, adding a $288 million cash dividend to its original share swap.

Fiat Industrial wants to acquire the 12% stake it doesn't own and relaunch Fiat Industrial as a new company with stock listings in New York and Italy. It expects the merger would simplify its ownership structure, attract more investors and give the new company greater access to credit markets.

Fiat Industrial said its $10 a CNH share dividend would be paid to minority holder after approval of its offer and before a merger would take place. Fiat Industrial's original bid was rejected on October 15 by a special committee set up by CNH's board to evaluate the offer.

The original stock swap of its offer — 3.828 shares in the new company for every CNH share — remain unchanged, it said. Based on Fiat Industrial's stock price on Monday, the new value of the deal is about $1.6 billion.

CNH is the world's second-largest seller of farm machinery behind Deere & Co. and owns New Holland, Case and Kobelco brands of farm and construction equipment. In addition to CNH, Fiat Industrial also owns the Iveco commercial trucks.

"We believe that Fiat Industrial has offered fair and reasonable terms for the CNH minority," said Chairman Sergio Marchionne in a written statement. He called it the company's "best and final" offer, in a letter to the CNH special committee. "There is simply no more to be offered by Fiat Industrial," he wrote.

"Adding this special dividend to Fiat Industrial's May 30 proposal represents a 25.6% improvement over the implied value of the original proposal, plus the value associated with an accelerated distribution," the company said.

Fiat Industrial said it would defer payment of the $10 dividend to the 88% of CNH shares controlled by company and Fiat-affiliated investors. The company gave the CNH committee until a minute before midnight on November 21 to reply to its new offer, adding that it hoped to reach a definitive agreement by November 25. A spokeswoman for the committee said on Monday the group did not have an immediate response to the latest offer.

"It seems like a pretty decent offer for shareholders," said Adam Fleck, an analyst at Morningstar.

If the latest offer is rejected, Mr. Marchionne said Fiat Industrial would still proceed with plans to create the new company. Despite Fiat's overwhelming stake in CNH, Fiat cannot unilaterally impose terms for acquiring the 12%. Under securities law in the Netherlands, where CNH is registered, a majority shareholder would have to own at least 95% of a company's stock to squeeze out minority shareholders.

Posted November 19, 2012

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