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Glass Lewis advises Fiat investors to vote for Chrysler merger

Glass

Proxy adviser Glass Lewis has recommended that Fiat investors vote in favor of a merger of the Italian carmaker and its U.S. unit Chrysler at a meeting on Aug. 1, saying its benefits outweighed concerns over a potential increase in voting power for its main shareholder Exor.

Fiat completed the buyout of Chrysler earlier this year and is hoping to incorporate the two car companies into Dutch-registered Fiat Chrysler Automobiles to boost the world’s seventh-largest carmaker’s appeal with international investors and pave the way for a U.S. listing planned for October.

Fiat-Chrylser CEO Sergio Marchionne said last week that he was confident that the merger would be approved.

International investors normally follow recommendations of big proxy advisors. Their advice could be important in deciding Fiat’s chances of securing the two-thirds majority it needs for approval of the merger.

Another major proxy advisor ISS and smaller peer Frontis Governance have recommended a vote against the merger, saying it decreased shareholder rights and tightened the grip on the company of holding group Exor, a worry that Glass Lewis says is offset by bigger benefits to shareholders.

“The proposed reincorporation is, on balance, in the best interests of shareholders as the benefits of access to deeper and more robust capital markets and improved governance standards outweigh our concerns regarding the potential increase in Exor’s voting power,” Glass Lewis said in its recommendation document seen by Reuters.

Exor controls Fiat Chrysler via a 30 percent stake, but its voting power could rise to as much as 46 percent through a loyalty scheme put in place as part of the merger to reward long-term investors.

A failure to secure approval of the merger could complicate the group’s plans to list in the United States and secure funds for its ambitious five-year business plan.

The merged FCA is expected to be headquartered in London and have its tax domicile in Britain, Fiat has said.