AMC Agrees to Sweetened Bid From Chrysler : 3 Governments and AMC Holders Must Approve
After more than two months delay, American Motors finally agreed to be acquired by Chrysler after the No. 3 auto maker upped its offer, AMC announced Wednesday.
AMC’s board of directors, which had been studying Chrysler’s takeover proposal since March, said Wednesday it approved a deal under which Chrysler will buy all of AMC’s outstanding shares not held by Renault, the French auto maker, for $4.50 per share.
Originally, Chrysler had offered non-Renault shareholders $4 worth of Chrysler stock for each AMC share. The higher price--which will also come in the form of Chrysler stock--will increase the value of the non-Renault portion of the deal from $522 million to $595 million, according to John Guiniven, a Chrysler spokesman.
Meanwhile, Chrysler also increased the yield on $200 million worth of notes that it agreed in March to pay Renault in exchange for its 46.1% stake in AMC. Chrysler said the interest rate on the eight-year notes it will pay to Renault in exchange for its 46.1% stake in AMC has been increased to 9.75% from 8%.
Chrysler’s board of directors met late Wednesday and approved the final agreement with AMC and Renault.
Chrysler shareholders don’t need to approve the acquisition, but it must be voted on by AMC stockholders. AMC said it plans to hold its annual meeting, which was delayed while the board studied Chrysler’s offer, within 90 days. The U.S. government must also study the merger for possible antitrust violations, while the French government, which owns Renault, and Canada, which has provided subsidies for an AMC plant in Ontario, also must pass on the deal.
“We hope that final approvals can be obtained quickly,” Chrysler Chairman Lee A. Iacocca said Wednesday.
Industry observers have given mixed reviews to Chrysler’s plan to acquire AMC ever since the deal was announced March 9.
While Chrysler will obtain AMC’s profitable Jeep division and a new assembly plant in Canada, it will also be saddled with $767 million in AMC debt and a passenger car lineup that is so weak that AMC is in danger of being driven completely out of the U.S. car market.
A new report from J. D. Power & Associates, a respected automotive market research firm, labels AMC’s car lineup “suspect,” saying that AMC’s few attractive passenger car models compete directly with existing Chrysler products.
Meanwhile, Chrysler will almost certainly have to try to renegotiate AMC’s unfavorable labor agreements with the United Auto Workers.
