Much Ado about Ferrari (and Fiat)

A few days ago Fiat Chrysler Automobiles (FCA) authorized to spin off Ferrari and list shares of the iconic sports car brand. Before the end of next year, a 10% stake in Ferrari will be part of an initial public offering in the U.S. and possibly a European exchange and the remainder of shares will be distributed to Fiat Chrysler shareholders. Moreover, FCA board has detailed an offering of up to 100 million common shares and the sale of a $2.5 billion mandatory convertible bond. The spinoff is expected to be completed in 2015 and its goal is primarily to raise capital to fund an ambitious five-year plan that includes developing new products for Chrysler, Fiat, Alfa Romeo, Dodge, Jeep and Ram divisions.

According to Marco Cobianchi fromthe Italian magazine Panorama, the Ferrari spinoff was a real bargain for someone in particular. Exor - one of Europe's leading investment companies and controlled by the Agnelli Family- is going to be the main Ferrari's shareholder. What is interesting is that the titles will be freely allocated to the members who will sign the $2.5 billion bond the company will issue next year.

As a result, to be an Exor shareholder means to invest in a company that controls the world 4-wheel most famous brand. Therefore, it was a real bargain for the company based in Turin because with only $600 million it has become the direct owner of a brand worth many billions.

Still, a huge problem persists and it concerns Fiat itself. The 2013 balance sheet tells us that FCA has earned 1,9 ? billion only thanks to Chrysler. In fact, Fiat shares alone have lost $911 million. As a consequence, Ferrari spinoff will help FCA recapitalization but it will also worsen Fiat Italian activities.

So what should the Agnelli family do with Fiat? It is extremely difficult, if not impossible, to answer this question. Italian government's involvement would be definitely appreciated, as well as the one of a foreign (and eager to invest) partner.

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