Fiat Industrial One Step Closer to Merger With CNH

By Gilles Castonguay

TURIN, Italy--Fiat Industrial SpA's (FI.MI) shareholders Tuesday approved a proposal that brings the Italian truck and engine maker a step closer to completing an operation begun more than a year ago to create a single company with its U.S. unit, CNH Global NV (CNH).

Nearly all of the shareholders attending an extraordinary meeting in its home town in northwestern Italy voted in favor of a proposal to merge the company with FI CBM Holdings NV, a vehicle recently created to facilitate the merger with CNH.

Once their peers at CNH vote in favor of a similar proposal on July 23, Fiat Industrial will merge with CNH to create CNH Industrial, a company with a simpler structure focused on engines, trucks and farm and construction machinery.

The vote by CNH shareholders will be a formality since they agreed late last year to hand over their shares in favor of a merger.

Under the terms of these two proposals, Fiat Industrial shareholders will receive one share in CNH Industrial for every Fiat Industrial share held, while those at CNH will get 3.828 shares for every share held.

The new company will be the third largest capital goods maker in the world, and the second biggest maker of farming machinery after Deere & Co. (DE).

By having its primary stock listing in New York, CNH Industrial will also have greater access to debt and equity markets than Fiat Industrial, which traded on the much smaller Milan market. CNH Industrial will nevertheless have its secondary listing in Milan.

Although it will be incorporated in the Netherlands, a request has been made to have its fiscal residency in the U.K.

The merger has long been sought by Fiat Industrial's chairman, Sergio Marchionne, who began the process in January 2011 by spinning the company off from car maker Fiat SpA (F.MI).

Since Mr. Marchionne is also chief executive of Fiat and the car maker shares Italian holding company Exor SpA (EXO.MI) as a major shareholder with Fiat Industrial, analysts view the operation as a blueprint for another merger in the works.

Fiat is preparing to take over U.S. partner Chrysler Group LLC. It wants to buy the 41.5% stake it doesn't already own, but it first must reach a deal on the price with the U.S. union trust that owns it and find a way with its bankers to finance the acquisition.

Mr. Marchionne told a news conference after the vote that he would be chairman of CNH Industrial.

He said the new chief executive would be named by the end of the third quarter.

Richard Tobin, the chief operating officer of Fiat Industrial and chief executive of CNH, is to become chief operating officer.

Write to Gilles Castonguay at [e-mail]; Twitter: @GRCastonguay

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