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CNH and Fiat Merger Gets Approval

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CNH Global N.V. recently announced that the Special Committee of the board of directors has given the approval for the merger with Fiat Industrial S.p.A. 
 
CNH Global had formed a special committee of independent directors, including Thomas J. Colligan, Edward A. Hiler, Rolf M. Jeker, Kenneth Lipper and Jacques Theurillat, to evaluate the merger proposal.
 
Last week, CNH, which competes with bigwigs like Caterpillar Inc. (CAT - Analyst Report), received a revised merger proposal from Fiat Industrial S.p.A. (FI). According to news source Reuters, Fiat Industrial raised the merger offer by 25.6% for the remaining 12% stake. Fiat Industrial already owns 88% of CNH Global. 
 
The merger between CNH and Fiat will result in the formation of a new company in the Netherlands. The shareholders of CNH Global would receive 3.82 shares of the new company for each CNH share while FI shareholders would receive one share of new company share for each FI share held. The shareholders of CNH will also be paid a $10 cash dividend per CNH share before December 31, 2012. 
 
The merger proposal was put forward by Fiat Industrial in May this year with an objective of creating a single company with a single trading stock. 
 
The total consideration represent a premium of over 23% over Fiat’s initial proposal of 3.828 NewCo shares for each CNH share, as per Fiat’s closing stock price on November 23, 2012. 
 
Meanwhile, the new company will adopt a loyalty voting structure wherein  the shareholders participating  in the combined meeting of the two companies to consider the merger and continue to hold their shares until closing could elect to have the shares they receive be entitled to two votes per share until those shares are transferred. 
 
Once the merger is completed, shareholders with single-vote shares of the merger company would be entitled to earn a double vote by holding the shares for at least three years.
 
The merger will be completed in the second quarter of 2013. The shares of the new company will be listed on the NYSE at closing with a listing on Borsa Italiana following closing.
 
We believe the merger will be a profitable venture as both companies enjoy a formidable position in the industries where they operate. Further, the merger will unite their strengths and elevate their position in the global economy. 
 
We maintain a Neutral recommendation on CNH GLOBAL NV. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold. 

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