CNH rejects Fiat Industrial merger

CNH has rejected a merger proposal from its majority shareholder, Fiat Industrial (FI), describing it as “Inadequate.” The unexpected decision follows an announcement made in May by Fiat Industrial proposing an all-share deal that would see the two companies combined into a single entity.

CNH put together a special committee to examine the offer with the help of financial and legal advisors. A statement from the company said, “Based on the information made available to us... we have unanimously concluded that the Proposal is inadequate and would not be in the best interests of CNH and its shareholders.”

However, CNH added that its committee remains available to look at any alternative proposals should FI put any forward.

Responding to the rebuttal, FI said it would be seeking a meeting with CNH’s special Committee to discover the basis for its decision and see whether a merger agreement could be reached on other terms that were still broadly in line with its original proposal. It also said it wants to move forward with the transaction promptly and hopes to reach an agreement in the next few weeks.

FI chairman Sergio Marchionne said, “FI remains committed to the strategic and financial benefits of the merger, which would simplify the group’s capital structure by creating a single class of liquid stock listed in new York and build a true peer in scale and capital market position to the major North American-based global capital goods companies, enhancing the Group’s appeal to international investors, improving the credit profile of both companies and providing an attractive platform for future growth opportunities.”

The rejection of the offer is all the more surprising given that FI already owns 89.3% of CNH. It had previously said it would vote in favour of a merger with its shareholding and that it didn’t expect to pay a premium on existing shares or make a cash offer for the 10.7% of CNH it does not own.