Earlier this week, Fiat Industrial SpA proposed a merger with CNH Global N.V. (CNH). The primary intent behind the proposal is to form a single company with a single trading stock.
A letter was sent by Fiat Industrial chairman Sergio Marchionne to the Board of Directors of CNH Global. As per this document, Fiat Industrial wishes to ameliorate the state of affairs by conflating CNH Global with Fiat Industrial to create one unique firm which would reduce many complexities. A formal consent would be required from all shareholders of both the companies in order to complete the transaction.
Fiat Industrial, which currently owns 88% of CNH Global, averred that the merger shall not lead to attrition or hamper the ongoing operations of the company. Rather, this momentous event would give birth to a company worth nearly $13 billion with a listing at the New York Stock Exchange and a secondary listing at The Netherlands. We believe this to be quite a profitable venture as both companies sustain a formidable position in the industries they pertain to and the merger will only unite their strengths and elevate the position even more in the global economy.
However, the presence of ominous rivals in the industry is something CNH Global should guard itself against. Big players in this regard include Titan International Inc. (TWI), AGCO Corporation (AGCO) and Kubota Corporation (KUB).
The current Zacks Consensus Estimates for the second quarter of fiscal 2012 and for fiscal 2012 are $1.52 per share and $4.69 per share, respectively. The company currently retains a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating. We also have an ‘Outperform’ recommendation on the company’s stock.
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