Chrysler Delays IPO

ChryslerChrysler Group has abandoned plans for an initial public offering this year so it can sort out a U.S. tax issue, two sources familiar with the process told Reuters.

An IPO is not likely until 2014, one of the people said, adding that underwriters were notified of the decision late last week. Fiat said that it would “not be practicable” to complete a Chrysler IPO this year.

Chrysler, which is majority owned by Italian automaker Fiat, was previously looking to kick off its IPO road show in early December.

The timeline hit a snag due to complications involving the conversion of Chrysler from a limited liability company to a C corporation, the people said.

Most public companies are C corporations, and in Chrysler’s case, the conversion to this structure would likely mean additional taxes, Peter Bible, chief risk officer of accounting firm EisnerAmper, said.

As a limited liability corporation, Chrysler has few shareholders and passes losses and the responsibility of paying taxes to its owner, but a C corporation pays its own taxes, can have an unlimited number of shareholders and also bears a greater tax burden.

Chrysler could not be immediately reached for comment. The people declined to be named because they were discussing confidential details.
The delay is the latest twist in CEO Sergio Marchionne’s effort to execute the next stage of the Fiat-Chrysler turnaround. Marchionne has led both automakers since Chrysler’s 2009 U.S. government funded bankruptcy restructuring.

Marchionne wants to formally merge the two companies and form the world’s seventh-largest auto group. He has repeatedly said he would prefer to avoid an IPO for the time being.

Chrysler was forced to file IPO paperwork in late September after it failed to reach a buyout deal with Chrysler’s minority shareholder, a retiree healthcare trust tied to the UAW.

Advisers were considering a valuation of about $10 billion for Chrysler, near the low end of the range considered, people with knowledge of the matter told Bloomberg. A union trust demanded the offering to resolve a pricing dispute with Fiat.

“The IPO, as it was unfolding, wasn’t a knock-out punch for either side,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business and Michigan Law School. “Each side was overly optimistic. It left both sides in a position where maybe it was better to keep talking.”


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