BURR RIDGE, Ill. and TURIN, Italy — Fiat Industrial S.p.A. and CNH Global, the parent company of Case and New Holland brand construction and agricultural equipment, have entered into a definitive merger agreement. Fiat, which already owned 88 percent of CNH shares, had been attempting to acquire the remaining shares for months but had been rejected before increasing its offer last month. The terms provide that Fiat Industrial and CNH will merge into a newly formed company, temporarily known as NewCo but not yet named, organized under the laws of The Netherlands. The new entity will be the world's third-largest capital goods provider, Fiat said.
Fiat Industrial shareholders will receive one NewCo share for each Fiat share and CNH shareholders will receive one NewCo share 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. The cash dividend, when added to the 3.838 NewCo common shares for each CNH share, represents a 25.6-percent premium compared to the implied value of Fiat Industrial's offer as of Nov. 16. The increased offer was made on Nov. 19.
The 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.
“We are pleased to have reached agreement on the basis of Fiat Industrial's improved proposal for the merger,” said Sergio Marchionne, Fiat Industrial's chairman. “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. 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.”
The merger is subject to approval of Fiat Industrial and CNH Global shareholders as well as customary closing conditions and regulatory approvals. The deal is expected to close during the second quarter of 2013.
In other company news, CNH Global and Kobelco Construction Machinery are dissolving their joint ownership and equity participations in all the companies formed in connection with their previous alliance and eliminating any geographical exclusivity rights associated with their agreements. The re-structuring of the relationship will allow CNH to have direct access to the burgeoning Asia construction market.
However, CNH will continue to manufacture hydraulicincorporating current Kobelco technology at its manufacturing facilities in Calhoun, Ga.; San Mauro, Italy; and Belo Horizonte, Brazil. CNH will continue to source select models, including short-radius excavators, from Kobelco in Japan. CNH's sourcing from Kobelco in Japan will continue for at least five years as well as component parts for at least 10 years. Also, CNH will market full-sized excavators featuring Kobelco technology under its New Holland Construction brand and compact excavators under its New Holland Construction and Case Construction Equipment brands.
“This change in our relationship gives CNH Construction Equipment the opportunity to build a stronger future for our customers, dealers and overall business,” said Mario Gasparri, head of CNH's construction equipment brands. “This change is vital because it lets us directly manage our business in all regions around the globe, including the Asia-Pacific region, which is home to the world's fastest-growing construction equipment markets. More than that, it allows us to leverage the industry-leading technologies and resources available to us as part of CNH Global and Fiat Industrial to better address customer needs.”