Fiat Industrial-CNH Merger Approved - Analyst Blog

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Fiat Industrial, the parent company of CNH Global NV (CNH), recently inched a step closer to fully merge with CNH after almost all of its shareholders voted in favor of the cash-and-share merger offer to buy the remaining 12% ownership stake in the latter.

Fiat Industrial is a leading international auto manufacturing company that designs, produces and sells vehicles for the mass market under well-known brands such as Fiat, Alfa Romeo, Lancia, Abarth, the Ferrari and Maserati. It has also formed a strategic alliance with premier auto major, the Chrysler Group, to further expand its geographic presence.

Earlier in Nov 2012, Fiat Industrial inked a definitive merger agreement to merge its businesses with CNH Global to form a separate company, organized under the laws of the Netherlands and listed on the New York Stock Exchange. However, for corporate tax purpose, the newly formed company will be based in the U.K. as it has a lower corporate tax rate than Italy.

The strategic merger would enable Fiat Industrial to shift its base from Italy, which is ravaged by four recessions since 2001. The successful integration of both the businesses would fortify the combined entity to compete at the highest level in the capital-goods sector with adequate flexibility to pursue inorganic growth at opportune times.

In addition, the combined company is likely to focus more on the excavator segment as CNH had ended its long-term alliance with Japanese company Kobe Steel, Ltd. and group company Kobelco Construction Machinery Co., Ltd. on Dec 31, 2012. Post-merger, the newly formed company would be the world's third-largest capital-goods company with a product line spanning Iveco delivery trucks, New Holland harvesters and FPT ship engines.

The merger is also likely to sow the seeds of a similar endeavor by serving as a "technical blueprint�! � for the combination between Fiat and its Chrysler division in the U.S.

Based in Amsterdam, CNH Global manufactures agricultural and construction equipments. The company primarily sells and distributes its products through its dealers and distributors spread across 170 countries. On Nov 12, 1999, CNH Global was formed following the merger of New Holland N.V. and Case Corporation. The company has three operating segments – Agricultural Equipment, Construction Equipment, and Financial Services.

CNH Global presently has a Zacks Rank #3 (Hold). Other notable companies in the industry include Lindsay Corporation (LNN) and ArcelorMittal South Africa Limited (AMSIY), both carrying a Zacks Rank #2 (Buy), and Kubota Corporation (KUB), which carry a Zacks Rank #1 (Strong Buy).