Chrysler 2011 Annual Report Download - page 159

Notes
158 Consolidated
Financial
Statements
at 31 December
2011
Under the organisational documents, Fiat was also granted the following additional call options on Class A membership interests in
Chrysler that at the date of this document have been exercised or have lapsed:
Alternative Call Option: At any time prior to 30 June 2016, Fiat was granted the option to acquire additional Class A membership
interests in Chrysler Group in lieu of the interests to be acquired for the third Class B Event if such event had not yet occurred. This
alternative call option ceased to have effect after the achievement of the Ecological Event in early January 2012.
Incremental Equity Call Option: Pursuant to which Fiat was entitled to acquire additional Class A membership interests enabling it to
increase its ownership interest in Chrysler by up to 16% (fully-diluted) in the aggregate. This option was only exercisable provided that
the sum of the outstanding principal and unfunded commitments arising from the U.S. Treasury loans and the Export Development
Canada loans did not exceed approximately $4 billion. The Incremental Equity Call Option was originally exercisable during the period
from 1 January 2013 to 30 June 2016. However, Fiat could exercise the option prior to 1 January 2013 if the government loans
referred to above were repaid in full. In addition, prior to full repayment of those loans Fiat’s total ownership interest in Chrysler could
not exceed 49.9%.
UST Call Option: Pursuant to which Fiat was entitled to purchase the entire interest held in Chrysler by the U.S. Treasury, exercisable
for a period of 12 months following the full repayment by Chrysler of the U.S. Treasury loans. Prior to a Chrysler Group Initial Public
Offering (“IPO”), the exercise price was to be based on the equity value of Chrysler agreed between Fiat and the U.S. Treasury or,
absent agreement, a price established by the average of the closest values determined by two of three investment banks appointed
by the parties. If an IPO had occurred, the price was to be based on the trading price for Chrysler’s common stock.
The price of the membership interests acquired in connection with the exercise of the Alternative Call Option or the Incremental Equity
Call Option is dependent on whether or not a Chrysler Group IPO has been completed at the time the option is exercised. If a Chrysler
Group IPO has not occurred, the exercise price for both of these options would be determined using a defined market-based multiple,
not to exceed Fiat’s multiple, applied to Chrysler Group’s reported EBITDA for the most recent four quarters, less net industrial debt.
If exercised contemporaneously with a Chrysler Group IPO, the exercise price for both options would be equal to the Chrysler Group
IPO price. Subsequent to a Chrysler Group IPO, the exercise price would be determined by reference to a volume-weighted average
price per share of Chrysler Group’s common stock.
As described above on 24 May 2011 Fiat exercised the Incremental Equity Call Option concurrently with Chrysler’s repayment of its
loans to the U.S. Treasury and Export Development Canada which was achieved through Chrysler’s refinancing in the market, the
utilisation of available liquidity and the $1,268 million cash consideration Chrysler received from Fiat in connection with the subscription
of 261,225 Class A membership interests, representing a 16% ownership interest in Chrysler on a fully-diluted basis, and increased
its interest to 46% (on a fully-diluted basis). As a result of the potential voting rights associated with options that became exercisable
on that date, Fiat was deemed to have acquired control of Chrysler under IAS 27 – Consolidated and Separate Financial Statements.
Accordingly Chrysler has been consolidated on a line-by-line basis by Fiat with effect from that date.
On 21 July 2011, Fiat acquired all of the Class A membership interests in Chrysler Group held by the U.S. Treasury, which represented
approximately 6.031% of the fully-diluted ownership interest in Chrysler Group, for cash consideration of $500 million. On that same
date, Fiat also acquired the U.S. Treasury’s rights under the Equity Recapture Agreement between the U.S. Treasury and the VEBA
Trust in exchange for cash consideration of $75 million, $15 million of which was paid to the Canadian government pursuant to a
separate arrangement between the U.S. Treasury and Canadian government.
On 21 July 2011, Fiat acquired all of the Class A membership interests in Chrysler Group held by the Canadian government, which
represented approximately 1.508% of the fully-diluted ownership interest in Chrysler Group, for cash consideration of $125 million. As
a result of these transactions Fiat’s ownership interest in Chrysler Group at 31 December 2011 was 53.5% (on a fully-diluted basis).
The acquisition of these additional non-controlling interests has been accounted for within equity.