We’re going to get a Chrysler IPO, it seems … just not until the first quarter of 2014.
According to a report in the Wall Street Journal, the Chrysler IPO should raise anywhere from $1.5 billion to $2 billion and fetch a market value of $10 billion to $11 billion, which probably will make it one of the largest transactions of 2014. The lead underwriter for the Chrysler IPO is JPMorgan (JPM), but the company has yet to select an exchange to list on.
While American auto aficionados/investors might be excited about the prospect of a Chrysler IPO, majority owner Fiat (FIATY) isn’t as stoked. CEO Sergio Marchionne has been engaged in tough negotiations with a United Auto Workers-affiliated medical trust to buy its 41.5% equity stake, which it received this because of the federal bailout in 2009. However, the sides haven’t been able to agree on a valuation.
While a Chrysler IPO will end the argument, it is far from ideal for Marchionne. After all, a wholly combined Fiat/Chrysler would be better positioned to thrive in the brutally competitive automotive world, which includes ubiquitous brands such as General Motors (GM), Ford (F), Honda (HMC) and Toyota (TM). If Fiat were able to land a full-blown merger, the company would not only get Chrysler’s cash hoard, but access to key assets like factories, a strong dealership network and various brands, not to mention cost-cutting opportunities.
It’s possible that a Chrysler IPO still might not happen — the UAW trust and Fiat could find common ground, but that probably would mean Fiat shelling out more money.
Should a public offering occur, however, it would be the first time since the late 1990s that the Detroit Three have operated as independently public companies.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.