FCAU - Fiat Chrysler Automobiles

[muscleman]

Yes, it shouldn't have any financial implications (what I was worried about as well).

 

For the record, you also get the special shares if you vote no. Additionally, if you vote no you get a free option to sell the shares at a little over $10 to the Fiat company (because of Italian law with mergers). Maybe I'll vote No for the free option but it doesn't matter much because it's only valid for 2 weeks or something and something truly disruptive must happen (during that time) for me to want to use that option.

 

Can you sell that option? If you can, then that is some small pennies on the floor. :D

[wachtwoord]

Yes, it shouldn't have any financial implications (what I was worried about as well).

 

For the record, you also get the special shares if you vote no. Additionally, if you vote no you get a free option to sell the shares at a little over $10 to the Fiat company (because of Italian law with mergers). Maybe I'll vote No for the free option but it doesn't matter much because it's only valid for 2 weeks or something and something truly disruptive must happen (during that time) for me to want to use that option.

 

Can you sell that option? If you can, then that is some small pennies on the floor. :D

 

I don't think so as the law mandating this is meant to protect individual investors.

[sleepydragon]

I just read the f4, and having the following questions. Does anyone know the answer?

 

Q1: The filing says:  "Fiat shareholder that properly exercises cash exit rights will be entitled to receive an amount of cash equal to the average closing price per Fiat ordinary share for the six-month period prior to the publication of the notice of call of the extraordinary general meeting which is equal to €7.727 per share."

 

The last close of Fiat in Milan is 7.5.  Does this mean I can arb by buying the stock now and then vote No, to lock in the 0.227/share profit?

I am not sure if I can still get those rights if I buy the stock now. But even if I can't, couldn't I just vote no, and also buy the same amount of stock to keep my exposure?

 

Q2: The filings also says: "if .. exceeds €500 million, a condition to closing of the Merger will not be satisfied"

So if too many people vote No, isn't the merge may actually fall apart? Seems profitable to vote no..

 

Q3: Because there could be some people who will vote "No" and get cash, doesn't this means the company is buying back stock? So it's possible there's no dilution and total share counts will decrease.

 

[peter1234]

Don't know the details, but usually they can cap things like this.

 

Could they just cap it at 500M and close the merger? I find it hard to believe that this would derail it.

;)

[phil_Buffett]

Yes, it shouldn't have any financial implications (what I was worried about as well).

 

For the record, you also get the special shares if you vote no. Additionally, if you vote no you get a free option to sell the shares at a little over $10 to the Fiat company (because of Italian law with mergers). Maybe I'll vote No for the free option but it doesn't matter much because it's only valid for 2 weeks or something and something truly disruptive must happen (during that time) for me to want to use that option.

 

Can you sell that option? If you can, then that is some small pennies on the floor. :D

 

like it. i too always looking for the pennies everywhere.  ;) ;D ;D ;D

[frommi]

Please correct me, but is it right that 94% of all shareholders have to vote yes for this merger to happen? (the proxy says not voting is like voting no, so 94% of all shareholders have to take action?)

When the stock price falls in the next two weeks because of whatever reason, the incentive to vote no just because of the cash can become a huge hurdle for this merger.

 

But the problem is when you vote no for the cash and the merger fails you will probably lose some money (because the stock will tank) and when it works you will not get the gains above the cash limit.

 

I get more and more interested to invest in Fiat, but i currently don`t fully understand what happens when this merger fails. In the end FIAT still owns Chrysler, but they probably have to raise money via equity? What else, do they have to sell Chrysler or can they simply repeat the vote under other terms?

 

This cash option for no votes looks really like a stupid thing, is this italian law?

[merkhet]

Please correct me, but is it right that 94% of all shareholders have to vote yes for this merger to happen?

 

Nope. Approval only requires an absolute majority of votes validly cast at the meeting. (No quorum requirement or anything along those lines.)

 

If the aggregate amount of cash to be paid to Fiat shareholders in connection with the exercise by such shareholders of cash exit rights under Italian law and to creditors pursuant to creditor opposition rights proceedings under Italian law and Dutch law, respectively, exceeds €500 million, a condition to closing of the Merger will not be satisfied.

 

The €500 million thing is a closing condition. However...

 

The Merger could be completed even if one or more of the conditions to the Merger are not satisfied.

 

Following shareholder approval, the effectiveness of the Merger will be subject to satisfaction or (to the extent permissible by law) waiver of certain of the Merger conditions. Following the approval of the Merger by the Fiat shareholders, in the event that Fiat considers waiving certain of the Merger conditions, shareholder approval of any such waiver may not be required or sought.

 

It's a closing condition, but since Marchionne controls both Fiat S.p.A. and Fiat Chrysler Automobiles N.V., I doubt that this will prove much of a problem -- they'll just waive the condition.

[frommi]

Thanks for your answers.

[Phaceliacapital]

The "vote against" strategy is actually not that bad (unfortunately).

 

- If the deal goes through you benefit from the upside of a consolidated firm

- If the deal falls through you earn 7.727/7.37 = 4.8% ?

 

You need to buy before the 18th and it's settled on the 1st of august, annualize 4.8% over that time period, not bad...

 

Am I missing something??

[merkhet]

It's currently unclear when the close of the merger might be... I think the documentation says some time before the end of 2014, unless I'm mistaken.

[wachtwoord]

The "vote against" strategy is actually not that bad (unfortunately).

 

- If the deal goes through you benefit from the upside of a consolidated firm

- If the deal falls through you earn 7.727/7.37 = 4.8% ?

 

You need to buy before the 18th and it's settled on the 1st of august, annualize 4.8% over that time period, not bad...

 

Am I missing something??

 

Yeah, it's a retarded Italian law which I think is highly unfavorable to long term share holders.

[frommi]

The "vote against" strategy is actually not that bad (unfortunately).

 

- If the deal goes through you benefit from the upside of a consolidated firm

- If the deal falls through you earn 7.727/7.37 = 4.8% ?

 

You need to buy before the 18th and it's settled on the 1st of august, annualize 4.8% over that time period, not bad...

 

Am I missing something??

 

When i understood it correctly you just hold your FIAT shares when the deal falls through and don`t get cash. When the deal goes through you get the cash. I don`t see a reason to vote no under these terms.

[peter1234]

The "vote against" strategy is actually not that bad (unfortunately).

 

- If the deal goes through you benefit from the upside of a consolidated firm

- If the deal falls through you earn 7.727/7.37 = 4.8% ?

 

You need to buy before the 18th and it's settled on the 1st of august, annualize 4.8% over that time period, not bad...

 

Am I missing something??

 

When i understood it correctly you just hold your FIAT shares when the deal falls through and don`t get cash. When the deal goes through you get the cash. I don`t see a reason to vote no under these terms.

 

I think he is talking about voting 'no' but the deal going through anyway. Then you will get cash. But there is only 500M available. Not sure how they determine how the 500M will get allocated.

::)

[wachtwoord]

The "vote against" strategy is actually not that bad (unfortunately).

 

- If the deal goes through you benefit from the upside of a consolidated firm

- If the deal falls through you earn 7.727/7.37 = 4.8% ?

 

You need to buy before the 18th and it's settled on the 1st of august, annualize 4.8% over that time period, not bad...

 

Am I missing something??

 

When i understood it correctly you just hold your FIAT shares when the deal falls through and don`t get cash. When the deal goes through you get the cash. I don`t see a reason to vote no under these terms.

 

I think he is talking about voting 'no' but the deal going through anyway. Then you will get cash. But there is only 500M available. Not sure how they determine how the 500M will get allocated.

::)

 

They have to pay in full or reverse the merger. So either they pay everyone (even if this exceeds 500M, which would require shareholder approval), or reverse the merger when more than 500M worth of shares vote NO AND want cash after the merger does happen.

[merkhet]

I suspect that if they paid the people who voted no, that this would be a pretty good price at which to do a buyback -- it's an inane rule, but it's pretty beneficial to us shareholders in this particular instance.

[wachtwoord]

I suspect that if they paid the people who voted no, that this would be a pretty good price at which to do a buyback -- it's an inane rule, but it's pretty beneficial to us shareholders in this particular instance.

 

It isn't because people will only do it when the shares trade below that number. if I have X shares I can sell these shares above market and just buy X new shares at market (of course I'd buy the X new shares before I get the new ones).  I think the biggest obstacle in this is the filing required (+ the research what filings) so I doubt it's useful for my position size, but this is just stealing from (other) share holders in a legalized manner.

[peter1234]

I suspect that if they paid the people who voted no, that this would be a pretty good price at which to do a buyback -- it's an inane rule, but it's pretty beneficial to us shareholders in this particular instance.

 

Agreed, except that they do not have extra cash at this point for a buyback.

So they might need to raise more capital via equity or debt...

;)

[merkhet]

I suspect that if they paid the people who voted no, that this would be a pretty good price at which to do a buyback -- it's an inane rule, but it's pretty beneficial to us shareholders in this particular instance.

 

It isn't because people will only do it when the shares trade below that number. if I have X shares I can sell these shares above market and just buy X new shares at market (of course I'd buy the X new shares before I get the new ones).  I think the biggest obstacle in this is the filing required (+ the research what filings) so I doubt it's useful for my position size, but this is just stealing from (other) share holders in a legalized manner.

 

I think your assumption is that aside from this provision, Fiat would be able to buy back 5% of their shares at some price lower than the price indicated in the merger agreement. I think this might not be true -- furthermore, I'm not sure I care that the price they're paying is 5% above market given that I think the intrinsic value of the shares is multiples above the current market price.

 

Agreed, except that they do not have extra cash at this point for a buyback.

So they might need to raise more capital via equity or debt...

;)

 

I suspect that if Marchionne needed to do so, he could offload an unnecessary property or two to fund the buyback of the dissenting votes that chose to be bought out.

[wachtwoord]

Well he must have considered the possibility at the very least ...

[merkhet]

That is one sexy beast...

 

http://online.wsj.com/articles/alfa-romeo-old-fashioned-driving-is-new-again-1405101133

[investor-man]

That is one sexy beast...

 

http://online.wsj.com/articles/alfa-romeo-old-fashioned-driving-is-new-again-1405101133

 

This has probably been posted, but I thought I'd see if I could find a review from Top Gear on the 4C:

http://www.topgear.com/uk/car-news/richard-hammond-on-the-alfa-romeo-4c-2013-11-28

[frommi]

It isn't because people will only do it when the shares trade below that number. if I have X shares I can sell these shares above market and just buy X new shares at market (of course I'd buy the X new shares before I get the new ones).  I think the biggest obstacle in this is the filing required (+ the research what filings) so I doubt it's useful for my position size, but this is just stealing from (other) share holders in a legalized manner.

 

But you can`t buy the shares of the new merged FIAT company, you can just get them when you vote yes with your old shares. If the merger fails the market will surely react negativly and you will end with a loss in the short term. I currently have no FIAT position and think about whats strategically the best time to buy. When the €500 million clause is not changed, this are just 5.5% of all outstanding shares. So when 5.5% of the shares are not able to vote, forget to vote or vote no because they think they are so clever and get the money, this merger will fail. I can`t see how this is not the most likely outcome given the numbers. Under this condition its probably a good idea to wait for the vote to happen and buy after the market reaction.

 

When i read the proxy correctly, than every share thats bought after july 23 is paid out in cash when the merger is successful? Will trading be halted after that date?

I am pretty sure the new shares will be priced way above the current market price when the merger goes through.

 

So we have a

70% chance that the merger fails and the shares are priced down to 5-6€.

30% chance that the merger succeeds and the new shares are worth >10€.

 

I can buy that bet now for 7.39€. Doesn`t look like a good idea for now. (short term)

Any flaws in my logic?

[peter1234]

 

So we have a

70% chance that the merger fails and the shares are priced down to 5-6€.

30% chance that the merger succeeds and the new shares are worth >10€.

 

I can buy that bet now for 7.39€. Doesn`t look like a good idea for now. (short term)

Any flaws in my logic?

 

Very good reasoning.

 

This is my understanding of the merger condition as well. But ... it would not make sense from the company's perspective to go though all the hassle with expecting the merger to fail. I am sure that the merger will (eventually) happen, maybe they have not spelled out how..? Especially since having a controlling shreholder...

 

You assume the share price to increase 35% right after the merger. This seems on the high side since economically not much changes right at merger time. Mid to longer term yes there will be advantages.

 

You assume the share price to fall 20-35% right after the merger, if it falls through. This seems high as well as not much changes short term.

 

Unfortunately I cannot offer better numbers for odds and price levels.

 

Short term, there also might be liquidity related impacts on price swings with the Italian de-listing and NYSE & Italian re-listings that might swamp fundamentals.

 

;)

[merkhet]

Any flaws in my logic?

 

Yes.

 

When the €500 million clause is not changed, this are just 5.5% of all outstanding shares. So when 5.5% of the shares are not able to vote, forget to vote or vote no because they think they are so clever and get the money, this merger will fail.

 

F-4: http://www.sec.gov/Archives/edgar/data/1605484/000119312514260113/d704286df4.htm

 

"At general meetings, resolutions are adopted with the favorable vote of an absolute majority of votes validly cast at the meeting, unless otherwise provided for under the FCA Articles of Association or Dutch law."

 

There is no quorum requirement. There is no supermajority requirement. It's just a simple majority of the votes that are cast at the meeting.

 

Anyone who does not vote or forgets to vote has little to no impact on the success or failure of the merger.

 

As for the cash exit rights (and, really, the voting requirements too), you and I covered this already a few posts ago. (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/fiat/msg178610/#msg178610)

[phil_Buffett]

Any flaws in my logic?

 

Yes.

 

When the 500 million clause is not changed, this are just 5.5% of all outstanding shares. So when 5.5% of the shares are not able to vote, forget to vote or vote no because they think they are so clever and get the money, this merger will fail.

 

F-4: http://www.sec.gov/Archives/edgar/data/1605484/000119312514260113/d704286df4.htm

 

"At general meetings, resolutions are adopted with the favorable vote of an absolute majority of votes validly cast at the meeting, unless otherwise provided for under the FCA Articles of Association or Dutch law."

 

There is no quorum requirement. There is no supermajority requirement. It's just a simple majority of the votes that are cast at the meeting.

 

Anyone who does not vote or forgets to vote has little to no impact on the success or failure of the merger.

 

As for the cash exit rights (and, really, the voting requirements too), you and I covered this already a few posts ago. (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/fiat/msg178610/#msg178610)

 

so it is almost sure to say the Merger will go trough. when exor goes to the vote and a few other shareholders who go with marchionne we will have almost 30-40% of fiat holders who will vote yes. if i understand everything right, if for example 50% of all holders of fiat go the vote then we Need only 26% to go trough. right ?