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Fiat’s Chrysler merger payout cap won’t be waived or raised

Fiat will not call a shareholders’ meeting to waive or raise the €500 million ($668 million) limit it has set for paying out dissenters in its merger with Chrysler, the carmaker said Tuesday.

CEO Sergio Marchionne wants to incorporate the two carmakers into Dutch-registered Fiat Chrysler Automobiles, paving the way for a U.S. listing to help fund an ambitious investment plan at the world’s No. 7 auto group.

But the merger could fail, at least for now, if the carmaker was asked to pay more than €500 million to investors who decide to sell their shares, exercising a legal right triggered by Fiat’s decision to move its registered offices away from Italy.

“If the cap were to be exceeded, and the company chooses to call a new extraordinary shareholders’ meeting, that meeting could simply adopt a new merger plan which would result in the determination of a new cash exit price,” Fiat said in a statement.

Fiat issued the statement, which reiterates comments made by Marchionne this month, in response to a report in Italian newspaper La Repubblica that said Fiat was ready to raise the self-imposed cap to ensure that the tie-up would go ahead as planned.

Under the current terms of the merger, dissenting investors can sell their shares for an exit price of €7.727, based on the stock’s average closing price for the six months prior to the issue of the merger documents.

Marchionne has repeatedly said he was unwilling to raise the €500 million threshold and would rather start the merger process all over again “on his own conditions.”

Should he decide to set new merger terms, the exit price would likely be lower given the drop in Fiat’s shares in recent weeks, making it easier for the carmaker to pay off dissenting investors without breaching the 500-million euro threshold.

Fiat has said that the creation of FCA will not lead to significant operational cost savings or synergies and failure to get the final green light for the tie-up in its current form would have little operational impact.

However, a rejection would prove embarrassing for Marchionne, who has been working on bringing together Fiat and Chrysler since helping rescue the carmaker from bankruptcy in 2009. It may also raise future financing costs, analysts have said.