$55-Billion, Five-Year Expansion Plan
Fiat Chrysler kick-starts IPO for Ferrari
Fiat Chrysler Automobiles NV has begun the process of selling a near 10-percent stake in luxury sports car brand Ferrari to Wall Street investors in a transaction that will help the automaker raise money to fund its own five-year expansion plan.
Fiat Chrysler said the initial public offering will price Ferrari at $48 and $52 per share, which will value one of Formula 1's most famous brands at $9.8 billion. The automaker will use the proceeds of the public stock offering to help fund an ambitious $55-billion, five-year expansion plan.
Sergio Marchionne, CEO of Fiat Chrysler, has said he wants to unlock the value of Ferrari and turn it into a full-fledged luxury brand, arguing that it should be viewed by investors more like a brands such as Prada SpA or Hermes International rather than as an automotive manufacturer.
The automaker said Monday it plans to sell to sell 9%, or 17.2 millionshares, of Ferrari and has given its own underwriters the ability to purchase up to 1%, or 1.7 million Ferrari shares.
After the sale of 10% of the shares, Fiat Chrysler will retain ownership of about an 80% of the shares but plans to distribute those shares to its own shareholders early next year. The Ferrari family owns the remaining 10 percent.
Shares in Fiat Chrysler rose 1.7 percent to 14.05 euros in Milan trading.
The automaker said the IPO is part of a "series of transactions to separate Ferrari from FCA."
Ferrari shares will be traded under the symbol RACE. No date for the start of trading was given and as in the case when Fiat merged with Chrysler there will be no secondary listing in Europe.
Marchionne was setting out immediately to persuade investors of the value inherent in Ferrari.
Marchionne, who will continue to serve as chairman of Ferrari, believes Ferrari can expand globally without harming its its exclusivity and has said Ferrari could sell as many as 10,000 cars per year. Those plans have been criticized by some Ferrari enthusiasts who believe increasing production could diminish the brand's exclusivity.
Ferrari sold just over 7,200 cars in 2014. In a prospectus filed with the U.S. Securities and Exchange Commission in July, the automaker said exclusivity is at the core of its strategic plan.
The company plans to pursue "controlled growth in developed and emerging markets" by adding dealerships and expanding its licensing agreements even as it carefully protects the exclusive nature of the exotic sports cars it makes. The company also said it plans to expand the brand into sportswear, watches, accessories, consumer electronics and theme parks.
"While we will continue to pursue a low-volume production strategy and maintain our reputation for exclusivity, we intend to respond to growing demand, both in emerging markets as well as in response to demographic changes and the growth in the size and spending capacity of our target clients," the company said in its prospectus.
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