Reuters: Hot Stocks: UPDATE 2-Fiat jumps on deal talk as CEO misses Frankfurt show

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UPDATE 2-Fiat jumps on deal talk as CEO misses Frankfurt show Sep 9th 2013, 12:33 Mon Sep 9, 2013 6:47am EDT * Traders say CEO may be negotiating on Chrysler buyout * Shares up over 5 pct, biggest European blue-chip rise (Adds trader comments, details, background) MILAN, Sept 9 (Reuters) - Shares in Italian carmaker Fiat rose over 5 percent on Monday, with traders citing speculation of a deal - possibly to buy out the rest of U.S. unit Chrysler - as the potential reason behind its chief executive missing the Frankfurt car show. Fiat said on Friday CEO Sergio Marchionne would not go to Frankfurt because of "work commitments", without elaborating. Shares in Fiat were up 5.1 percent at 6.105 euros by 1040 GMT, outperforming a 1.2 percent rise in the DJ Stoxx index for the European auto industry. "The absence of Marchionne at such an important event makes you think he has something more important to do and this boosts speculation," a trader said. Another Milan-based broker said Marchionne may be involved in negotiations with a U.S. healthcare trust to reach an agreement on the purchase of its Chrysler stake. Fiat is expected to buy the trust's 41.5 percent stake in Chrysler and then merge the two manufacturers to create the world's seventh-largest auto group by sales. The United Auto Workers healthcare trust became Chrysler's second-largest shareholder when Chrysler emerged from bankruptcy in 2009 and the union swapped future healthcare payments owed to it for a stake. The healthcare trust, known as VEBA, manages those healthcare benefits on behalf of the union. "Any news on VEBA would be positive for Fiat," the trader said. Fiat and VEBA have been at loggerheads over the price for the minority stake, and Marchionne may be looking to settle the dispute out of court to avoid a lengthy legal battle. Should the battle proceed to court, Fiat may have to wait until 2015 for a trial, which in turn could take more than a year to complete. Fiat runs the two automakers as a single company, but wants to buy the rest of Chrysler to squeeze out more synergies, cut borrowing costs and access some of Chrysler's cash flow. Traders said on Monday that Marchionne may have withdrawn from the Frankfurt car show to prepare an upcoming roadshow for truck and tractor maker Fiat Industrial, which is merging with its U.S. unit CNH. However, the Fiat Industrial stock only rose 0.9 percent on Monday. Marchionne is the chairman of Fiat Industrial. (Reporting by Reporting by Giancarlo Navach and Isla Binnie, Writing by Agnieszka Flak; Editing by Mark Potter) Link this Share this Digg this Email Reprints

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