Ferrari IPO: Fiat Chrysler Plans Spinoff

Ferrari IPOFiat Chrysler Automobiles N.V. (NYSE/FCAU) (FCA) could be spinning off its luxury car division, with a Ferrari IPO planned for later this year.

On Tuesday, July 7th, Bloomberg reported that Ferrari picked UBS Group AG (NYSE/UBS) to lead its IPO, according to sources close to the matter. JP Morgan Chase & Co. (NYSE/JPM) and The Goldman Sachs Group, Inc. (NYSE/GS) are also going to sell around 10% of the shares. (Source: Bloomberg, July 7, 2015.)

In the original press release from last October, the company said that the transaction would be completed during 2015. FCA expected Ferrari shares to be listed in the U.S. and possibly also on a European stock exchange. (Source: Fiat Chrysler Automobiles, October 29, 2014.)

Sergio Marchionne, CEO of FCA, has said that after the IPO, production of Ferrari would remain in Italy. Previously, Marchionne had said that the spinoff of Ferrari would take place by the end of June. Earlier this month, he said that the IPO could not happen before October 12 due to tax reasons.

The company plans to sell 10% of Ferrari in the IPO. Piero Ferrari, the son of founder Enzo Ferrari, has 10% of the company and plans to keep his holding. The remaining 80% of Ferrari is expected to be distributed to Fiat Chrysler investors.

According to Marchionne, Ferrari would be valued at least at 10 billion euros (USD$11.0 billion) in the IPO. He mentioned the uniqueness of the brand, and the scarcity of value from the mere 10% that they were selling.

One reason for the Ferrari IPO is to help Fiat Chrysler fund its 48 billion euro (USD$52.5 billion) investment plan. Fiat Chrysler expects the investment to expand its Jeep, Alfa Romeo, and Maserati brands globally.

Marchionne has also been pushing for industry consolidation. According to him, a lot of car manufacturers are making essentially the same cars, and companies need to merge to reduce manufacturing redundancies. However, no one listened. Most recently, General Motors Company (NYSE/GM) decided to pass on FCA’s merger proposition.