MILAN, Oct 30:
Fiat Chrysler Automobiles announced yesterday it will spin off sports car maker Ferrari into a separate company, a move to unlock the luxury brand’s value and distinguish it from its mass-market parent.
The spinoff aims to raise money to support the newly merged carmaker’s plans to invest €48 billion (RM199.73 billion) over five years to compete with global giants Toyota and Volkswagen.
Shares in Fiat Chrysler soared on the news. “I think we are doing the right thing by giving Ferrari a proper, unique place in the capital markets to be evaluated and valued as a luxury automaker,” said chief executive Sergio Marchionne.
Fiat Chrysler, which owns 90% of Ferrari, will sell 10% of its shares in an initial public offering (IPO), and distribute the remaining 90% of its holding to its own shareholders.
Marchionne refused to speculate on Ferrari’s value, saying only “I think we will be pleasantly surprised.”
Investors seemed to agree. Shares in Fiat Chrysler closed up nearly 13% in Milan, and jumped 11.93% on the New York Stock Exchange.
News of the spinoff was coupled with an announcement that Fiat Chrysler will issue US$2.5 billion (RM8.18 billion) in convertible bonds to help fund its business plan.
Marchionne said Fiat Chrysler expects the new initiatives to inject €4 billion worth of capital into the car company, taking into account also the leveraging of Ferrari and floating 10% of its shares.
Barclays analyst Kristina Church placed the value of Ferrari as an independent company at €3.8 billion, which would value the 10% IPO at around €400 million.
The board intends to complete the spin-off during 2015, and said shares would be listed in the US, with a possible double listing in Europe, as Fiat Chrysler has done.
A Ferrari spin-off had long been speculated by industry experts as Marchionne seeks to maximise values from the group’s brands.
Fiat Chrysler’s other luxury brands, including Alfa Romeo and Maserati, will remain part of the parent company, and are a key part of Marchionne’s plans to focus production in Italy on higher-margin luxury cars.
The decision to break off Ferrari comes about two months after an awkward management transition at Ferrari that saw longtime chairman Luca Cordero di Montezemolo resign after a public spat over strategy with Marchionne, who has since taken over his job.
Marchionne has been vocal in his displeasure over Ferrari’s long absence from the Formula One car racing winner’s circle, and has pledged to get the team back to the top. The last time it won the driver’s championship was in 2007.
“I think we need to continue to protect Mother Goose, which is the production of cars, and we need to get back on the track and start winning again, which is part of the DNA of the house,” Marchionne said.
Ferrari has limited production to 7,000 vehicles a year to maintain its exclusivity, and Marchionne said production would be increased only to match an expansion in the customer base.
Also yesterday, Fiat Chrysler Automobiles NV announced it returned to a profit in the third quarter thanks to a good performance by its luxury brands and gains in North America and Asia.
It made a net profit of €174 million for the three months ending Sept 30. That compares with a loss of €15 million in the same period last year. Revenues rose 14% to €23.5 billion.
Ferrari and Maserati combined earnings before interest and tax were €484 million, up 55% from a year ago.
Deliveries rose 9.7% to 1.1 million vehicles. Marchionne said he expects 2015 volumes to rise 5% above 2014 levels, to 4.7 million units, boosted by ramp ups in Jeep and Fiat 500 production and the launch of Alfa Romeo into the US market next year.