Italian automaker Fiat SpA (FIATY.PK) is expected to raise its stake in Chrysler Group LLC to 61.9 percent from 58.5 percent as early as next week, the Wall Street Journal reported Wednesday, citing people familiar with the matter.
Fiat has an option to acquire a 3.3 percent stake in Chrysler by purchasing Chrysler shares held by the United Auto Workers retiree healthcare trust. According to the WSJ report, Fiat is likely to exercise this option to increase its stake in Chrysler.
The transaction would reduce the Chrysler stake held by the Michigan-based trust, also known as the voluntary employee benefit association or VEBA, to 38.2 percent from 41.5 percent. The trust fund provides health care for retired union workers.
The transaction, which would be the first purchase of trust fund shares by Fiat, is said to be likely to reduce the chances of Chrysler holding an initial public offering of its shares to investors. Under bankruptcy rules, Fiat can exercise its call option starting July 1.
Chrysler emerged from Chapter 11 reorganization in June 2009 and was bought by Fiat in a U.S. government-brokered deal. Fiat took control of Chrysler under the bailout deal and in early January 2012 raised its stake in the U.S. car maker to 58.5 percent. Chrysler's results were consolidated by Fiat Group from June 2011.
The WSJ report noted that Fiat can further boost its ownership stake in Chrysler to 75.1 percent by exercising other call options on VEBA shares. Fiat can buy as much as 3.32 percent of Chrysler from the VEBA every six months between July 1, 2012 and June 30, 2016. The total amount Fiat can accumulate is limited to 16.6 percent.
In late April, Fiat reported a higher first-quarter profit on strong contributions from Chrysler whose cars are sold in the U.S. and Canadian markets. Excluding Chrysler, Fiat saw a decline in quarterly sales as weak European economy impacted volumes of its passenger and light commercial vehicles, especially in Italy.
FIATY.PK closed Wednesday's trading at $4.68, up $0.06 or 1.30 percent on a volume of 7,507 shares.
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