Fiat Chrysler launches Ferrari IPO, sets share price at $48-$52

Article by Andrew Christian, on October 13, 2015

Fiat Chrysler Automobiles NV is finally embarking on its planned sale of the Italian supercar manufacturer Ferrari. According to a company filing with the U.S. Securities and Exchange Commission, 9% of the company’s majority stake in Ferrari will be offered through an initial public offering facilitated by the New York Stock Exchange.

The IPO will sell off 17.2 million shares that Fiat Chrysler owns in Ferrari’s holding company, Ferrari NV. With shares assigned a value of $48 to $52 each, the IPO is valued at $9.82 billion. Since Ferrari’s most recent financials show a positive cash flow, analysts predict that there will be more investors than available shares during the IPO.

In fact, they are expecting investors to outnumber shares ten-to-one, which means that there will be 10 times more initial requests than there are shares offered. This bullish outlook towards Ferrari’s stock is foreseen despite the diesel emission testing scandals involving fellow automaker Volkswagen AG.

Earnings from the IPO will partly go towards a $54.5 billion investment program spearheaded by Fiat Chrysler’s CEO, Sergio Marchionne. The program is designed to widen the markets for the company’s other automobile brands namely the Jeep, Alfa Romeo and Maserati.

A fraction of the proceeds will also go towards settling debts incurred by Fiat Chrysler. The original founders of the Ferrari brand will not go empty-handed from the exchange. Enzo Ferrari’s son, Piero, will retain a 10% ownership in the independent Ferrari.

He will also receive 280 million Euros from the total proceeds of the IPO. Part of the spin-off involves passing on a debt of 2.8 billion Euros to Ferrari, payable to Fiat Chrysler. After the IPO, Ferrari will commence its own fund-raising to issue instruments valuing 2.128 billion Euros of that debt to third parties.

This debt, plus the $9.8 billion value during the IPO, brings Ferrari to a combined value of $12 billion. The IPO will have as underwriters UBS AG, Bank of America Corp.’s Merrill Lynch, Banco Santander SA, Mediobanca SpA and JPMorgan Chase & Co.

According to Chrysler’s SEC filing, the company allocates 1.7 million shares for these underwriters as an additional option. After the IPO, Fiat Chrysler’s remaining 80% shareholdings in Ferrari will be distributed among the remaining shareholders.

The Agnelli family will continue to exercise voting power in the spin-off company’s board. This is made possible by a loyalty ownership scheme in the structure of Ferrari NV. The scheme is also present in the structure used by Marchionne to incorporate Fiat Chrysler, of which the Agnelli family constitutes majority share ownership.

After becoming separate from parent Fiat Chrysler, Ferrari will continue to produce its trademark sports cars as confirmed by its CEO, Amedeo Felisa, in September. In fact, it even plans to raise production to 9,000 vehicles by 2019, nearly 2,000 units more than its delivery figures last year.

Ferrari had delivered a total of 7,255 units of its supercars last year, earning it an income of 389 million Euros before interest and taxes. The Ferrari brand will also remain exclusive to high-end sports cars and will not branch out to SUVs or electric automobiles under the belief that its customers want its traditional engines.

Source: Bloomberg

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