In an effort to raise money, Fiat Chrysler Owned Ferrari is all set to spin off Ferrari by filing for the unit’s first public offering on the New York Stock Exchange. Sergio Marchionne – CEO of Fiat Chrysler says that clear expectations have been set for the Ferrari brand and therefore decided last year to sell a 10 percent stake of the luxury sports car brand via a public offering, and distribute the rest among its shareholders. The Ferraro IPO will be listed under the Dutch Holding company of Ferrari, and unlock value at both Fiat and Ferrari.
Fiat Chrysler has estimated its luxury sports brand to be valued at more than $11 billion or £7bn, and plans to complete the separation by early next year. The reason for this offering according to Sergio Marchionne is an effort to raise roughly $5 billion to cut debt, and simultaneously help fund a much larger $53 billion investment program that is designed to expand the Alfa Romeo, Jeep and Maserati brands globally.
The big question is whether the Ferrari stock will actually perform like a Ferrari considering that there is certainly fascination in owning a Ferrari vehicle or even a Ferrari t-shirt, but this may not hold true for a share of Ferrari stock. Son of founder Enzo Ferrari, Piero Ferrari owns 10 percent stake in the company and plans keep his holding. This IPO filing will provide a so called loyalty share program, which will help long term investors gain more voting power.
Piero Ferrari will likely participate in the loyalty program and after the spinoff will gain about 15 percent of voting power, while Exor SpA – an investment group that represents the Agnelli family that founded Fiat will hold 30 percent of the voting power. As of march 31th, Ferrari’s balance sheet included roughly 977 million Euros in deposits that were owned by Fiat Chrysler, and these joint cash managements will end after the separation, allowing Ferrari to manage its finances on its own.
As claimed by Fiat Chrysler, the Maranello unit of the company in Italy is worth no less than an astounding 10 billion Euros, which is equivalent to more than half the market value of the parent company. Marchionne expects investors to view Ferrari as a luxury car brand just like any other luxury goods maker such as Hermes International SCA and Prada Group, which trade at a phenomenal 20 times more than auto manufacturers. In the first quarter alone, Ferrari witnessed a sales rise of 0.2 percent to 621 million Euros, where net income soared 20 percent to 65 million Euros. Makes the average Ferrari car insurance premium seem very low.
Marchionne used this same IPO strategy last year when he led the merger of Fiat with Chrysler in the US to form what is today Fiat Chrysler. Joint bookrunners for the listing are UBS AG, Banco Santander SA and Merrill Lynch, while UBS is sole global coordinator.