Fiat Makes offer to CNH
Owner of Case IH, New Holland is already part of Fiat, but the move would roll the farm and construction equipment maker into the Italian corporation.
Willie Vogt 
Published: May 30, 2012
Here's a news item that might, at first, confuse a farm reader. Fiat Industrial SpA has made an offer to acquire CNH. Yet FI already owns 88% of the farm and construction equipment maker, and owner of two venerable brands Case IH and New Holland. But consider it a move to increase stock liquidity for CNH.
For shareholders liquidity is a big deal, providing the ability to buy or sell relatively easily, which is a positive thing in the equity markets.
In a letter to the CNH board from Sergio Marchionne, chairman of FI, the proposal notes that the existing shareholding structure of FI and its affiliates includes the distinct equity securities of FI and CNH. This structure "hinders the group's ability to capitalize on strategic opportunities that arise from time to time, while inviting arbitrageurs to exploit market inefficiencies at the expense of shareholders of both companies."
Owner of Case IH and New Holland is already part of Fiat, but the move would roll the farm and construction equipment maker fully into the Italian corporation. The letter to the board says these issues were exacerbated by FI's demerger from Fiat SpA because of the higher proportion of FI represented by CNH.
If the deal goes through, the new company would be based in the Netherlands and listed on the New York Stock Exchange with a secondary European listing. FI is also proposing a voting structure with double votes for shares held for more than three years to foster long-term shareholders.
Per a CNH release, the Board of Directors of CNH "expects to evaluate the proposal through a committee of independent directors which would retain independent financial and legal advisors to assist it."
Market analysts see value in the increased liquidity of the stock especially as the firm has been building market strength. They note that potential buyers have looked elsewhere and while this transaction would dilute direct exposure to ag and construction it would be better for potential buyers.
In his letter to the board, Marchionne targets completing the deal in 2012 but tells the CNH board that any committee appointed would "be able to reach a definitive agreement with the next several weeks."
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