FCA Spins Off 10 Percent Of Ferrari
Who wants to own a piece of Ferrari?
Fiat Chrysler Automobiles announced plans to spin off 10 percent of the Ferrari supercar brand. This will help FCA to raise some extra cash, and counter surging debt. This announcement caused the company’s stock to soar 19 percent.
Ten percent of Ferrari stock will be offered to the public, while 80 percent will be distributed among current FCA shareholders. The remaining 10 percent will be retained by Piero Ferrari, son of company founder Enzo Ferrari.
“Ferrari’s spinoff is the market-moving news investors were looking for,” Vincenzo Longo, a strategist with IG Markets in Milan, said by phone. “Fiat is putting its jewel on the market.”
The company said that the deal should be completed next year, and it’s been estimated that the sale will raise about $1.15 billion. FCA needs a cash injection to finance it’s $61 billion expansion plan set to run through 2018. FCA is hoping to increase net income fivefold through it’s expansion. While CEO Sergio Marchionne has said that the plan does not require additional cash, heavy debt leaves it vulnerable to volatility in European and Brazilian markets.
“As we move forward to secure the 2014-2018 Business Plan and work toward maximizing the value of our businesses to our shareholders, it is proper that we pursue separate paths for FCA and Ferrari,” said Marchionne in a statement.
As FCA’s largest shareholder, the Agnelli family, led by John Elkann, will own about 25 percent of Ferrari once the spin-off is complete. If Ferrari is valued around 9 billion euros ($11.5 billion), the Agnelli family will hold 2.25 billion euros of Ferrari stock and it will become the largest shareholder of both FCA and Ferrari. The family has controlled Fiat for 115 years, and recently gained full control of Chrysler Group. They now own more than 30 percent of FCA.
By Linda Aylesworth – car-news.ca