For Jeep's Chinese suitor, it's 'complicated'

Key Points
  • Fiat Chrysler is searching for a partner, but has been unsuccessful so far on that front
  • Chinese automaker Great Wall Motor may be interested in the company's Jeep brand
  • But timing and pricing will complicate any deal

Some guys have all the luck. Fiat Chrysler boss Sergio Marchionne has not been one of them.

Ever since General Motors rebuffed a merger attempt with its rival, the outspoken Italian CEO has been searching for a partner, unsuccessfully flirting with a crisis-hit Volkswagen and France's PSA before the latter struck a deal for GM's European business.

2015 Jeep Grand Cherokee
Joe Raedle | Getty Images

Investors have been pouring money into FCA shares, however, hoping that Marchionne's luck is about to change in the form of a Chinese suitor. Great Wall Motor, the country's largest SUV maker, confirmed in a regulatory filing that it is interested in Fiat Chrysler, but said it had not held formal talks with the company.

That weighed on Shanghai listed shares Wednesday. It also dampened a rally in FCA shares in New York and Milan overnight, but the stock still finished slightly higher Tuesday — bringing the seven-day run to 6 and 8 percent, respectively.

"I think the upside for Fiat Chrysler is tremendous," Bill Russo, Managing Director at Gao Feng Advisory told CNBC.

Russo, a former Chrysler executive in Asia, added that the only downside risk is what's left after you take Jeep out — in the event Great Wall is only interested in the iconic SUV brand: "What happens to the rest of the crown, when you remove that jewel?"

"It's a question of how much they would pay," Russo added.

Will Fiat Chrysler spin off Jeep?

That multi-billion dollar question is crucial to the short-term bull case for FCA, amid questions about how Great Wall, with a market cap well below its potential target, would finance the deal. Jefferies analysts predict the Jeep brand alone has an enterprise value of 17 billion euros.

As with most dating games, there's also the thorny issue of timing.

Evercore Analyst ISI, Arndt Ellinghorst said in a note that he expects "FCA's management would want to defer for another ~6 months, as the ongoing earnings improvements and deleveraging would enable the company to seek a better price."

FCA appeared to back that view, writing earlier this week that it had not engaged with Great Wall Motor and remains "fully committed" to its 2018 plan with just six quarters left to completion.

Plus, the longer FCA keeps Great Wall waiting, the more time there will be for rival bidders to come forward.

"It would certainly put a value to what Jeep would be worth, then others would be able to consider if they want to step in ... By all means, if Great Wall takes a step back, others will probably step forward," Russo said.

Jefferies analyst Philipe Houchois agreed, telling CNBC "every car company is looking."

Still, industry watchers agree there is no shortage of risks threatening to sink an acquisition, not the least of which is politics.

An analyst at Maybank Kim Eng, KL Leong, had this to say about the probability of Jeep coming under Chinese ownership: "It is a complicated deal involving many moving parts. I think it may take some time."