CNH Global produces agricultural and construction equipment under the Case and New Holland brands Fiat Industrial designs and manufactures agricultural and construction equipment trucks commercial vehicles buses and specialty vehicles as well as engines and transmissions for those vehicles and for marine applications FPT Industrial SpA

Fiat Industrial, CNH Agree to Merge

Nov. 26, 2012
Improved offer seals consolidation New organization more appealing to shareholders Lower management, financing costs

Fiat Industrial S.p.A. and CNH Global N.V. have arrived at a definitive merger agreement and will combine their businesses, thereby creating one of the world’s largest manufacturers of capital equipment. The merger, first proposed by Fiat Industrial last spring, was rejected by CNH directors until directors of the two firms settled new terms earlier this month.

"We are pleased to have reached agreement on the basis of Fiat Industrial's improved proposal for the merger,” according to Fiat Industrial chairman Sergio Marchionne. “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."

CNH is an Illinois-based manufacturer of agricultural and construction equipment, notably the CNH, Case IH, Case and New Holland brands. Fiat Industrial, which was spun off from the automaker Fiat S.p.A. in 2010, produces Iveco trucks and Fiat Powertrain Technologies engines, transmissions, and powertrain products. It already controls nearly 90% of CNH, and its proposal would establish a new corporate entity originally estimated to have a valuation of $13 billion.

The original offer was an all-stock proposal based on market prices from late winter 2012.

Fiat Industrial’s aim is tocombine its holdings to achieve lower corporate financing costs and to establish a more attractive shareholding position with a single stock offer. Marchionne stated the new structure will reward long-term, stable shareholders, and give the new organization “greater flexibility to pursue strategic opportunities.”

Fiat Industrial and CNH will merge into a new company in which Fiat Industrial shareholders will receive one share for each Fiat Industrial share, and CNH shareholders will receive 3.828 shares of the new company for each CNH share in the merger.

CNH would pay a cash dividend of $10 per CNH share to its own minority shareholders prior to completion of the merger. That dividend, along with the 3.828 NewCo common shares for each CNH share, represents a 25.6% premium over Fiat Industrial's initial offer.

The new company will be listed on the New York Stock Exchange, and also will seek to list its stock on the Milan exchange after the closing.

About the Author

Robert Brooks | Content Director

Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics, including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others. Currently, he specializes in subjects related to metal component and product design, development, and manufacturing — including castings, forgings, machined parts, and fabrications.

Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)

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