Fiat Chrysler has filed for Ferrari’s IPO

Article by Andrew Christian, on July 26, 2015

Fiat Chrysler Automobiles NV has submitted a filing for Ferrari’s initial public offering on the New York Stock Exchange, putting the unit a step closer to being spun off. In a filing with the U.S. Securities and Exchange Commission, FCA said that it aims for this separation to be completed early next year.

It is estimated that Ferrari is valued at over $11 billion. CEO Sergio Marchionne is hoping that this share sale will help reduce debt by raising approximately $5 billion. It is also meant to help fund an investment program worth 48 billion-euro ($53 billion) that will lead to the global expansion of the Jeep, Alfa Romeo and Maserati brands.

Erik Gordon, a law professor at the University of Michigan's business school, said that the question now is if the supercar brand’s stock will perform like a Ferrari. He explained that while there’s “glamor” in owning anything from Ferrari, it isn’t as easy to brag about having Ferrari stock.

Last year, Ferrari revealed that it wants to sell 10% of Ferrari in an IPO and to distribute the 80% stake that remains to its own investors. A 10% stock is owned by founder’s son Piero Ferrari, who wants to keep his holding. The filing reveals a loyalty share plan that gives more voting power to long-term investors.

The filing also revealed that other participants in the loyalty program include Piero Ferrari and Exor SpA, which is the investment vehicle for the Agnelli family that founded Fiat. The filing also mentions that Exor will hold over 30% of the voting power while around 15% will go to Piero Ferrari after the spinoff.

As of March 31, the balance sheet of Ferrari consists of 977 million euros in deposits that belong to Fiat Chrysler's cash pool. Ferrari will manage its own finances after the separation as joint cash-management arrangements will be terminated after the separation.

The company has unveiled that Ferrari is worth "at least" 10 billion euros, which means that it is equivalent to over 50% of the market value of its parent. Marchionne has said that he believes investors will consider Ferrari to be comparable to other producer of luxury goods like Prada SpA and Hermes International SCA.

These companies trade at more than 20 times earnings, double the value of automakers. In the first quarter, Ferrari's sales climbed 0.2% to 621 million euros. Its net income increased by 20% to 65 million euros. After the separation, Ferrari will be listed as a holding company with a Netherlands registration.

This same strategy was used by Marchionne in 2014 when he oversaw the merger of Fiat with Chrysler to create Fiat Chrysler. The joint bookrunners for the listing are UBS AG, Bank of America Corp.'s Merrill Lynch and Banco Santander SA. Meanwhile, UBS is the only global coordinator.

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