Fiat wins partial victory in bidding Chrysler

Fiat won a partial victory on Tuesday in its path to a full buyout of Chrysler after a US judge accepted the Italian carmaker's legal positions in two pivotal disputes with an autoworkers' health-care trust that is a minority Chrysler shareholder.

Delaware Court of Chancery Judge Donald Parsons stopped short of ordering VEBA, the United Auto Workers trust, to sell 54,154 Chrysler shares to Fiat for $139.7 million, as the Italian carmaker had sought in its lawsuit filed last year.

Instead, Parsons said certain questions need to be answered through discovery and testimony at a trial.

A Fiat spokesman declined to comment. A spokesman for the health care trust did not immediately respond to a request for comment.

VEBA countersued Fiat, claiming the Chrysler shares were worth about $343.1 million, closer to what analysts estimate is market value.

The current dispute covers the first of five call options that will allow Fiat to acquire 16.6 percent of Chrysler over time. In total, the difference in the two sides could amount to more than $1 billion.

Fiat already runs the two automakers as a single company, but wants to buy the rest of Chrysler to squeeze out more synergies, cut borrowing costs and access Chrysler's cash flow.

Buying out all 41.5 percent of Chrysler shares it doesn't already own will cost Fiat $4.5 billion, UBS analyst Philippe Houchois estimates, depending in part on the outcome of the call-option tussle.

The two sides disagreed on the definitions of Chrysler's "company equity value."

Parsons ruled in Fiat's favor on what he called "two of the largest drivers" of the dispute - whether notes issued to two health-care trusts were debts of Fiat and New Chrysler, and whether certain income of Chrysler should be included in Fiat's Earnings before interest, taxes, depreciation and amortization.

Those two issues account for about $90 million in the difference in price for the disputed Chrysler call option, according to Parsons' opinion.

Unresolved are other parts of Fiat's price calculation. Parsons also found he does not have jurisdiction over the VEBA's claim that Fiat's price would violate a US Department of Labor exemption regarding retirement rules.

Fiat has exercised three of the five options so far, offering $592.4 million for nearly 10 percent of Chrysler.

Fiat is expected to continue talks with VEBA to acquire the remaining 25 percent not covered by the call options. VEBA has the right to list the 25 percent on the stock exchange if it wants.