MILAN -- Fiat S.p.A. plans to buy the remaining stake in Chrysler owned by the U.S. and boost its holding to 57 percent by the end of 2011, as the Italian carmaker moves to consolidate the U.S. company.
Fiat has notified the U.S. Treasury of its intent to exercise its option to purchase the government's 6.6 percent stake in the third-largest U.S. automaker, the company said in a statement. The purchase price will be based on the equity value of Chrysler agreed by Treasury and Fiat within 10 business days.
If Fiat and Treasury cannot settle on the price, the amount will be determined by two of three investment banks appointed by the company and the U.S. government.
"They're moving faster and more decisively than most investors anticipated," said Max Warburton, a Sanford C. Bernstein & Co. analyst in London. "It seems the plan is that Fiat-Chrysler will at some point be merged to create one firm."
Fiat boosted its holding in Chrysler to 46 percent last week after the U.S. automaker repaid $7.6 billion in U.S. and Canadian government loans.
As a result of the loan payments, the U.S. government's stake in Chrysler was cut to 6.6 percent from 8.6 percent, and Canada's interest was reduced to 1.7 percent from 2.2 percent.
A United Auto Workers trust now owns 45.7 percent of Chrysler, down from 59.2 percent.
Fiat expects to get an additional 5 percent stake in the fourth quarter, in return for developing a fuel-efficient car for Chrysler.
CEO Sergio Marchionne, who runs both automakers, said earlier this week that Fiat could boost its stake in Chrysler to more than 51 percent before an initial public offering of the U.S. automaker, as it seeks to buy the shares for less money.
Fiat will consolidate Chrysler results from June 1.
A merger of Fiat and Chrysler is planned to reduce costs and improve integration, though there is no set timing and a combination isn't likely this year, Marchionne said May 25.
The CEO may sell Chrysler shares to the public later this year or in 2012, depending upon market conditions and cash needs.
"I don't know anyone who wouldn't be pleased that Fiat is paying back the US taxpayers," said Jim Gillette, an analyst with Northville, Mich.-based IHS Automotive. "Chrysler is bringing on some really good product with the help of Fiat and will very likely be in pretty good shape here over the next decade."
Fiat has options to increase its Chrysler holding to more than 70 percent, the U.S. company said this month in a filing with the U.S. Securities and Exchange Commission.
Those options include the right to buy the Treasury's remaining stake in the 12 months after government loans are repaid.
Fiat also has an option to acquire 40 percent of the original stake held by the UAW trust, Chrysler said. The option is exercisable from July 1, 2012, to Dec. 31, 2016, and in amounts of as much as 8 percent in any six-month period, according to the filing.