Fiat Chrysler today surprised analysts by announcing plans to spin off its Ferrari sports car brand next year in a bid to raise capital to fund its €48 billion growth plan.
The board has agreed to spin off Ferrari in 2015, as well as list a 10% stake on the stock exchange – in an apparent U-turn on the leadership’s previous statements that they wouldn’t separate the Maranello operation from Turin.
Fiat Chrysler, which today announced a 7% rise in third-quarter operating profits to €926 million, will still hold the controlling stake in Ferrari, but the administrative separation brings closer the possibility that it may one day divest its crown jewels altogether.
So why is Fiat Chrysler Automobile spinning off Ferrari?
It’s all about raising funds to pay for CEO Sergio Marchionne’s ambitious expansion plans elsewhere in the group. Ferrari and Maserati, the two luxury sporting brands owned by the Fiat empire, produce exceptional profits considering their meagre output. Now we can see that the Italians want to milk those assets more effectively to pay for growth elsewhere, as the company struggles with weak demand in its European heartland.
While 10% of Ferrari shares will be sold on the stock exchange, the remaining 90% will be distributed among existing Fiat Chrysler shareholders, led by the Agnelli family which retains a strong interest in the car maker it founded.
It is not yet clear where the Ferrari shares will be traded, but Fiat’s own listing moved to the New York exchange earlier this month. It is likely Ferrari stock will be traded there and possibly in Europe, too.
Marchionne made no bones about his plans to milk Ferrari for all its worth. ‘As we move forward to secure the 2014-2018 business plan and work toward maximising the value of our businesses to our shareholders, it is proper that we pursue separate paths for FCA and Ferrari,’ he said.
Analysts say the Ferrari flotation is a sop to investors, to whom it is issuing $2.5 billion in convertible bonds.
What does the move mean for Ferrari?
Very little, day to day. The company is still owned by Fiat. It will stick to its existing product plans with the same management team in charge. But today’s news seems to shed further light on therecent departure this autumn of Ferrari grandee Luca di Montezemolo, the leader who succeeded Enzo on his death in 1988.
He had clashed with Marchionne on future strategy and the gradual change in ownership could have been one of the issues which caused friction.
Marchionne, the architect of today’s fund-raising, is now in charge of Ferrari. And we’ve yet to hear his plans for the world’s best-known sports car brand. Who’d bet against it being a thrilling ride?
Click here to read our pick of di Montezemolo’s greatest Ferraris.