Fiat Industrial and CNH Global, parent of Case, New Holland and Kobelco construction equipment brands, have entered a definitive merger agreement to combine their businesses into what Fiat Chairman Sergio Marchionne calls "the world’s third largest capital goods provider."
"Completion of this merger will bring to a conclusion a lengthy process of simplifying and rationalizing the group’s equity capital structure and allow shareholders in both companies the opportunity to participate in the growth prospects of the world’s third largest capital goods provider, which will be a true peer in scale and capital markets appeal to the other major global capital goods companies," said Marchionne. "This appeal will be further enhanced through the loyalty share structure intended to reward long-term stable shareholders that share our goal of enhancing shareholder value over the long term, as well as through enhanced flexibility to pursue strategic opportunities."
Terms of the definitive merger agreement are consistent with Fiat Industrial’s final offer announced November 19.
Fiat Industrial, which already owns 88 percent of CNH, and CNH will each merge into a newly formed operating company organized under the laws of the Netherlands (NewCo). Fiat Industrial shareholders will receive one NewCo share for each Fiat Industrial share and CNH shareholders will receive 3.828 NewCo shares for each CNH share in the merger.
CNH will pay a cash dividend of $10 per CNH share to the CNH minority shareholders prior to completion of the merger. CNH will use its reasonable best efforts for the dividend to be paid prior to December 31, 2012 or as promptly thereafter as practicable. The cash dividend, when added to the 3.828 NewCo common shares for each CNH share, represented a 25.6% premium over the implied value of Fiat Industrial’s initial offer as of November 16, 2012, the trading day prior to the date Fiat Industrial’s final offer was announced.
NewCo shares will be listed on the New York Stock Exchange. NewCo will also use its reasonable best efforts to cause the NewCo shares to be admitted to listing on the Mercato Telematico Azionario managed by Borsa Italiana shortly following the closing of the mergers.
NewCo will implement a loyalty voting structure; shareholders of each company that are present or represented by proxy at the respective shareholders’ meetings to consider the merger transaction and that continue to hold their shares until completion of the merger may elect to receive common shares registered in a special segment of NewCo’s share register and be entitled to two votes per share. NewCo shareholders will be entitled to retain double-vote shares indefinitely. If a NewCo shareholder transfers shares entitled to double votes, the shares will revert to the regular segment of the register and will be entitled to a single vote per share.
Following completion of the merger, new shareholders may earn a double vote through a loyalty mechanism by holding the shares continuously for at least three years.
The merger agreement contains customary representations and warranties and the merger is subject to customary closing conditions, including a condition capping the exercise of withdrawal rights by Fiat Industrial shareholders and opposition rights by Fiat Industrial creditors, at €325 million in the aggregate. The merger is also subject to approval by the shareholders of each of Fiat Industrial and CNH.