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Timetable for Chrysler-Fiat merger unaffected by lawsuit

A planned merger between Michigan's Chrysler Group and Fiat, Chrysler's current majority owner, will not be affected by a lawsuit concerning the companies. Fiat currently owns 58.5 percent of Chrysler but encountered resistance from the Voluntary Employees Beneficiary Association, Chrysler's minority owner, to its offer to purchase an additional 3.3 percent stake in the company for $139.7 million. Fiat has filed a lawsuit against VEBA in effort to resolve the issue, but insists that the lawsuit is "completely separate" from its plans to acquire the entirety of Chrysler.

While Fiat and Chrysler's top executive did not give reporters a schedule for the planned acquisition, he explained that he hopes to have completed the merger by 2014 at the latest. He added that he did not know when the court hearing of Fiat's lawsuit against VEBA will issue a ruling.

Fiat's dispute with VEBA is centered on a contract written in 2009, which was written in order to help Chrysler recover from bankruptcy with the approval of the U.S. Treasury. Fiat argued that the contract obligated VEBA to sell the 3.3 percent stake in question, but the two groups disagreed regarding the interpretation of its language. "There is no other way to resolve this dispute than in court," explained Fiat's chief executive.

Experts say the dispute and delayed merger have caused Fiat shares to drop. Share prices initially went up in anticipation that Fiat would fully take over Chrysler, which has seen a return to profit in recent months. However, experts say that a large dispute over a relatively small portion of Chrysler may have led traders to conclude that the takeover process will more complex than they first thought.

Regardless of the size of the business, as companies expand and change, it is important to consider all of the legal matters that may occur. Contract disputes, such as the one discussed in this post, can sometimes create delays in mergers and acquisitions. Seeking the advice of a business attorney can help resolve the legal challenges that may arise so clients can continue to operate their business successfully.

Source: CNBC, "Fiat-Chrysler merger still on track despite lawsuit: CEO," Sept. 27, 2012

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