Fiat Industrial SpA and CNH Global have entered into a definitive merger agreement (the "Merger Agreement") to integrate the businesses of Fiat Industrial and CNH. The terms of the definitive agreement relating to the merger are consistent with the final offer announced on 19 November. Under the agreement, Fiat Industrial and CNH will merge into a newly incorporated company incorporated under Dutch law (NewCo).
As part of the merger, 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.
Pursuant to the final merger agreement, prior to the effective date of the merger, CNH will pay minority shareholders a dividend of $10 for each share of CNH. CNH will use its best efforts to ensure that the dividend is paid by December 31, 2012 or later in the strictly necessary technical times.
The dividend paid in cash, together with the 3,828 NewCo shares for each CNH share, represents a premium of 25,6% over the implied value of Fiat Industrial's initial offer measured as of November 16, 2012, the trading day preceding the date on which Fiat Industrial presented its final offer. In addition, CNH's minority shareholders will benefit from the fact that the dividend will be paid prior to the effective date of the merger.
NewCo's shares will be listed on the New York Stock Exchange. NewCo will also make its best efforts to have its shares admitted to listing on the Mercato Telematico Azionario organized by Borsa Italiana soon after the completion of the merger.
NewCo will adopt a voting system based on loyalty to the company; the shareholders of each of the two corporate structures who are present either directly or by proxy at the respective shareholders' meetings called to resolve on the merger and who continue to hold their shares until the effective date of the merger will be able to choose to receive shares which will be registered in a special section of the NewCo shareholders' register and which will give the right to two votes.
These NewCo shareholders will have the right to cast this double vote for an indefinite period. If a NewCo shareholder trades his shares which carry the right to a double vote, these shares will return to the general section of the register and will be entitled to a single vote for each share. Following the completion of the merger, new shareholders may be eligible to earn double voting through this loyalty mechanism, provided they continue to hold said shares for three years.
Sergio Marchionne, Chairman of Fiat Industrial, declared: ”We are pleased to have reached an agreement on the basis of the proposed improvement relating to the merger.
The 2 completion of this transaction will bring to a conclusion a long process of simplification and rationalization of the corporate structure of the group and will allow the shareholders of both companies to participate in the growth prospects of the third largest producer of capital goods in the world, which, by size and capacity attractive for investors, it will be a real alternative to the other major companies operating in the capital goods sector”.
For Marchionne ”this attractiveness will be further implemented by the loyalty-based voting structure, which is intended to reward long-term shareholders who share our goal of creating long-term shareholder value, as well as by the increased flexibility for pursuing strategic growth opportunities”.
The Merger Agreement contains the usual representations and warranties and the merger will be subject to the usual conditions to which its effectiveness is subject, including a condition limiting the exercise of withdrawal rights by the shareholders of Fiat Industrial and the opposition rights of its creditors.
The merger is also subject to its approval by the shareholders of Fiat Industrial and CNH. Fiat Industrial, as a shareholder holding 88% of CNH's share capital, said it will vote in favor of the merger in CNH's general meeting. The merger is expected to become effective during the second quarter of 2013.
Fiat Industrial used Goldman, Sachs & Co. as financial advisors and Sullivan & Cromwell LLP, Freshfields Bruckhaus Deringer LLP, and Legance Studio Legale Associato as legal advisors. The Special Committee of the Board of Directors of CNH used JP Morgan and Lazard as financial advisors and Cravath, Swaine & Moore LLP, De Brauw Blackstone Westbroek NV, and Bonelli Erede Pappalardo as legal advisors.
