Fiat Industrial S.p.A. (MI:FI) submitted its best and final offer to the Special Committee of the Board of Directors of CNH Global N.V. regarding the proposed strategic combination of Fiat Industrial with CNH.
Following the Special Committee's October 15, rejection of Fiat Industrial's initial proposal, Fiat engaged in further discussions with the committee to improve the terms. Fiat made its final offer by letter from Sergio Marchionne, chairman of Fiat Industrial, to the CNH Special Committee.
The final offer proposes a merger of Fiat Industrial and CNH into a newly formed company in the Netherlands ("NewCo") in which CNH shareholders would receive 3.828 NewCo shares for each CNH share and Fiat Industrial shareholders would receive one NewCo share for each Fiat Industrial share.
To sweeten the original proposal, Fiat added a cash dividend of $10 per CNH share to be paid to CNH shareholders prior to the merger. If possible, the dividend would be paid, prior to the end of this year, accelerating CNH shareholders' realization of a significant portion of the value in the transaction.
Fiat Industrial has indicated willingness to defer receipt of the dividend on its 88% of the CNH shares in order to preserve the Group's capital pending completion of the merger. Adding this special dividend to Fiat Industrial's May 30 proposal represents a 25.6% improvement over the implied value of the original proposal, plus the value associated with an accelerated distribution.
Fiat Industrial will withdraw this final offer and terminate discussion of the merger if CNH doesn't accept the terms before Thursday, November 22, 2012, and enter a definitive merger agreement by Sunday, November 25.
If this best and final offer is not accepted, Fiat Industrial intends to proceed with the other aspects of the proposed transaction, including the merger of Fiat Industrial with a newly formed company incorporated in the Netherlands with shares listed in New York and Milan.
This merger, as well as other steps that Fiat Industrial has discussed with the Special Committee and intends to take, are intended to preserve for Fiat Industrial shareholders most of the expected benefits of the proposed strategic combination with CNH.
"While we believe that Fiat Industrial has offered fair and reasonable terms for the CNH minority, if our improved best and final terms remain unacceptable to the Special Committee, Fiat Industrial intends to move ahead and execute all permissible actions within its control, while at all times being mindful and respectful of the rights of the CNH minority shareholders, in which it can achieve for its shareholders the benefits sought through the proposed strategic combination," said Sergio Marchionne, Fiat Industrial's chairman. "Fiat Industrial will do so by further integrating operations and ensuring that intra-group dealings with CNH are on fully priced arm's-length terms in order to reduce or eliminate any unintended transfer of value to CNH.
"Fiat Industrial will also refocus its efforts and resources on bolstering operational excellence and investor relations to enhance the performance and market perception of the Fiat Industrial group as a whole," Marchionne continued. "This refocus, along with the elimination of diverging 'home' jurisdictions between the listed companies in the Group, should facilitate improved liquidity and the anticipated re-rating in the parent's new U.S.-listed shares. Finally, in order to efficiently use capital within the Group, Fiat Industrial would not expect to approve dividends from CNH for the foreseeable future."