Chrysler Presses Ahead With IPO Plan Price Range Could Be Set as Early as This Week, Pressuring Fiat

By Christina Rogers and Telis Demos November 24, 2013 Group LLC is going full speed to get an IPO done by mid-December, ratcheting up pressure on the company's two owners to strike a deal that would allow majority owner, Fiat F.MI +1.36% SpA, to buy full control before Chrysler lists. The company expects to set a price range for its initial public offering as early as this week and complete it in the first half of Decemberall in an effort to beat the IPO market slowdown around the holidays, people familiar with the matter said. Chrysler had initially targeted the IPO for the first quarter of 2014. The U.S. auto maker and its underwriting banks are considering setting the price range to raise $1.5 billion to $2 billion, in a sale that would help monetize part of a minority stake held by a health-care trust affiliated with the United Auto Workers, the people said. The price range implies a total value for Chrysler of between $9 billion and $12 billion, based on the 16.6% stake the health trust has demanded that the company register for the IPO, people close to the process said. Analysts have estimated Chrysler's value at $10 billion to $11 billion. A spokeswoman for the UAW trust declined to comment. On Friday in Milan, Fiat Chairman John Elkann said the banks are "doing their job" in establishing a valuation certified by third parties. "We take note of it," Mr. Elkann said. Fiat declined to comment further. Chrysler hasn't been a stand-alone publicly traded company since its merger with Germany's Daimler-Benz AG in 1998. Analysts and investors are still questioning whether a stock sale now would be good for the company, or will even take place. The situation is highly unusual. CEO Sergio Marchionne, who runs both Chrysler and Fiat, has said repeatedly he doesn't want a stock sale, preferring that Fiat buy out the trust's stake in a private deal. Mr. Marchionne previously has outlined plans to merge the two companies into a single, global auto maker.

The two sides, however, haven't agreed on a price for the UAW trust's holdings. In January, the trust demanded that Chrysler register a portion of its shares after talks to sell them directly to Fiat stalled. The process of preparing for an IPO is a way to establish a market value for the trust's holdings. The IPO, at the price that might be proposed, would peg the trust's 41.5% stake at between $3.7 billion and $5 billion. The high end of that range would require strong investor optimism for Fiat-Chrysler's growth prospects, said people familiar with the deal. The UAW trust has demanded the stock sale because it needs the money to pay out medical benefits to retired Chrysler workers. The trust, officially known as the UAW Retiree Medical Benefits Trust, took a stake in Chrysler during the auto maker's 2009 bankruptcy restructuring. People familiar with the deal said the two parties could still agree on a price during, or even after, the investor "roadshow" for the IPO, just before the deal is set to price. The establishment of a price range should allow Chrysler to kick off the roadshow, which would last for about a week, these people said. The IPO holds risk for both sides. For Fiat, a public stock sale will complicate its efforts to secure full control of Chrysler, delaying a merger with its U.S. partner and hoped-for cost savings. A roadshow also puts Mr. Marchionne in the awkward position of trying to persuade investors to pay top dollar for shares he would like to own. At the same time, there is no guarantee the trust will do better for its beneficiaries by going through with a public share sale. A lackluster reception from investors could mean it ends up with less cash than it would have gotten by reaching a deal with Fiat. Chrysler also will have to pay fees to bankers, lawyers and brokers related to the IPO, which will cut into proceeds. Since the initial filing in September, Chrysler has also picked Bank of America Merrill Lynch to help lead the IPO, adding its name behind J.P. Morgan Chase & Co., said people familiar with the matter. It also added Barclays BARC.LN -0.06% PLC Goldman Sachs GS +0.62% Group Inc., Morgan Stanley MS +1.46% and UBS AG UBS +0.72% , those people said. Gilles Castonguay contributed to this article.