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What are the odds on an initial public offering at Chrysler, the U.S. auto maker controlled by 58.5-per-cent shareholder Fiat? A listing would certainly be a means of settling the long-running valuation dispute between the Italian car maker – which wants to increase its stake – and the United Auto Workers union retiree health care trust, or VEBA, which holds the other 41.5 per cent.

Fiat boss Sergio Marchionne says his best estimate of avoiding an IPO is 50:50. And those odds seemed to narrow slightly on Friday, with news that the U.S. car maker is inviting bank pitches to run a listing – a move which builds on the VEBA's formal registration demand in January.

Still, the pressure for a deal has to be on. In court documents, Fiat has reportedly valued Chrysler at $4.2-billion (U.S.): the VEBA, at $10.3-billion. To try and make sense of that discrepancy, it is worth looking at the terms of Fiat's call option, exercisable between July, 2012, and July, 2016, for blocks of the VEBA trust's holding.

If an IPO has not taken place, the exercise price is to be determined by multiplying Chrysler's earnings before interest, tax, depreciation and amortization by a market-based multiple "not to exceed Fiat's multiple," and then backing out the group's debt. In short, the task is to work backward from enterprise value calculation that uses Fiat's rating as an upper peg.

On a back-of-the-envelope basis, this gives a number remarkably similar to the Fiat calculation. (Chrsyler's modified 2012 EBITDA was $5.5-billion; Fiat's EV/EBITDA multiple is 2.6 times according to Capital IQ; net industrial debt at Chrysler was $1-billion at end-2012; and the US company's pension deficit is $8.9-billion.) But it is hard to imagine that the market, in an IPO, would apply such a lowly rating to Chrysler shares.

GM trades on an EV/EBITDA ratio near four; Volkswagen, seven; and Ford, higher still. True, Chrysler's margins are lower than U.S. peers', and dipped in 2012. But Chrysler has offered 2013 guidance – sales up by at least a tenth and profit, by more than 30 per cent – which would make anyone exposed to Europe's volume car market drool.

Fiat's 2011 purchases of the U.S. and Canadian governments' Chrysler interests, moreover, implied a market price tag of $8-billion-plus. Mr Marchionne's hand is constrained by Fiat's balance sheet and its investment program needs. But allowing the market to referee this dispute seems a very unattractive option.

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