MILAN (Bloomberg) -- Fiat Industrial S.p.A., the truck and tractor manufacturer that Italian carmaker Fiat spun off in 2011, plans to merge with tractor unit CNH Global and move its primary listing to New York.
The manufacturer proposed the creation of a new company to CNH's board in a share swap that won't include any cash, it said in a statement Wednesday. The existing Fiat Industrial will be delisted from the Milan exchange at the completion of the deal, according to two people familiar with the matter.
Fiat Industrial owns 88 percent of CNH, which trades in New York. Fiat Industrial Chairman Sergio Marchionne has been looking for a solution to buy out minority CNH shareholders, who currently own a stake worth $1.15 billion. He said last month Fiat Industrial was working on a solution after the parent company simplified its capital structure by converting its saving and preferred shares into common stock.
"The proposed move will have one key effect, reduction in borrowing costs for the combined entity given a U.S. listing versus the present Italian one for Fiat Industrial," said David Arnold, a sales specialist at Credit Suisse Group AG in London.
New York listing
The deal will create a single class of shares listed on the New York Stock Exchange, with a secondary listing in Europe, the company said. Fiat Industrial has not decided yet where to list in Europe, with the Milan exchange one of the possibilities, said the people, who declined to be identified discussing the private plan.
"The proposed transaction allows the capital market to properly assess the combined value of Fiat Industrial and CNH, Marchionne said Wednesday in the statement. Exchange ratios for the new company, which will likely be based in Netherlands, will be ''established at market,'' according to the statement.
CNH's board has not yet fully evaluated the proposal, according to a separate statement. CNH and Fiat Industrial shareholders won't receive a premium in the deal since cost savings are seen as ''minimal," the Italian company said. The closing will be subject to a 250 million-euro ($312 million) cap on Fiat Industrial shareholders withdrawal rights, the company said.
Exor S.p.A., the holding that controls Fiat, supports the integration plan, according to a separate statement. Exor said it wants to be a long-term shareholder in the new entity.