Farm and industrial equipment maker CNH Global N.V. (NYSE: CNH) has agreed to the terms of proposed merger with Fiat Industrial SpA in a move that will create the third-largest capital goods maker in the world. Fiat already owns 88% of CNH.
CNH Global has a market cap of about $11.7 billion, while Fiat Industrial’s market cap is about $12.8 billion. Only Caterpillar Inc. (NYSE: CAT), with a market cap of about $55 billion, and Deere & Co. (NYSE: DE), with a market cap of about $33 billion, will be larger.
Under the terms of the merger agreement, shareholders of CNH will receive 3.828 shares of stock in the new company for each share of CNH they own. In addition, Fiat Industrial will pay a special dividend of $10 a share for each CNH share. According to the special committee of CNH directors who approved the deal, the total consideration amounts to a premium of 23% over the closing price of CNH stock last Friday.
Shares in the new company will be listed on the New York Stock Exchange, and may be listed in Italy as well. The new company (NewCo) will also implement a “loyalty voting structure”:
[S]hareholders of each company that are present or represented by proxy at the respective shareholders’ meetings to consider the merger transaction and that continue to hold their shares until completion of the merger may elect to receive common shares registered in a special segment of NewCo’s share register and be entitled to two votes per share. NewCo shareholders will be entitled to retain double-vote shares indefinitely. If a NewCo shareholder transfers shares entitled to double votes, the shares will revert to the regular segment of the register and will be entitled to a single vote per share. Following completion of the merger, new shareholders may earn a double vote through a loyalty mechanism by holding the shares continuously for at least three years.
The companies expect the deal to be completed in the second quarter of 2013.
Shares of CNH are inactive in premarket trading this morning, having closed at $48.86 last Friday after posting a new 52-week high. The stock’s 52-week range is $34.36 to $49.45.