MILAN (AP) -- Italian automaker Fiat is closing in on its goal of taking a majority stake and full control of Chrysler LLC by the end of the year, announcing a deal Thursday to buy another 16 percent share sooner than expected for $1.3 billion.
Fiat SpA will exercise an equity call option, bringing its stake to 46 percent, once Chrysler has repaid loans to the U.S. and Canadian governments, which Fiat said would happen in the second quarter of 2011.
Fiat expects to gain another 5 percent, for a majority 51 percent share, by the end of the year upon condition of approval of a 40 miles-per-gallon car for the United States.
"This is a fundamental step toward the completion of the momentous integration of Fiat and Chrysler, initiated less than two years ago, that will result in the creation of a global automaker," Fiat and Chrysler CEO Sergio Marchionne said in a statement.
Fiat has had operational control of Chrysler since taking a 20 percent stake in June 2009 in exchange for small car and more fuel-efficient engine technology, along with management know-how. But further integration is expected as Fiat's stake increases and Chrysler launches a public offering, which could come as early as this year.
Marchionne said the company had exercised the call option sooner than expected "to bring about, in the shortest possible time, the birth of a single group capable of fully leveraging the joint development of the respective international activities."
Marchionne told analysts Wednesday that integration was under way, with significant synergies on the purchasing level where the carmaking units Fiat SpA and Chrysler LCC combine forces with the newly formed Fiat Industrial, or farm, construction and truck units.
Analysts had expected Fiat to exercise the call option before Chrysler launches an IPO in order to get a better price.
"The timing was a little bit faster than we were expected. The amount was in line with our expectation," Morgan Stanley analyst Stuart Pearson said.
Investors welcomed Thursday's deal and pushed Fiat shares up 3.35 percent at euro6.80 ($9.87).