Fiat Chairman Luca di Montezemolo has said that the Group could buy back part of the 34 percent stake that Mediobanco holds in Ferrari 'when the time is right', according to respected Italian daily newspaper Il Sole 24 Ore yesterday.

With Mediobanca recently publicly stating that they no longer see the minority stake they hold in Fiat's Ferrari sportscar brand as part of their long-term future investment strategy, Fiat Group and Auto Division CEO Sergio Marchionne has been reportedly busy looking for a solution to the problem. Italian banking group Mediobanca, who have recently overhauled their fixed investments, purchased the stake in Ferrari from Fiat back in 2002 when they led a consortium of banks that paid 775 million euros at a time when Fiat was desperate to raise cash quickly to keep itself afloat as the Auto Division was then burning cash at an unsustainable rate. Mediobanca has since sold a minority 5 percent stake in Ferrari to the Mubadala Development Company, a Government of Abu Dhabi-backed investment corporation for 114 million euros which values Ferrari at 2.28 billion euros.

The Fiat Group inserted a clause allowing them to repurchase the Mediobanca stake before the end of June 2006 for the original price of 775 million euros plus an undisclosed interest rate. Marchionne has recently gone on record as saying that the ownership of Mediobanca's stake was at the forefront of his attention and will be resolved within this timescale. One possible solution comes as Mediobanca are considering a bond issue for the 34 pct shareholding which Fiat could then participate in and convert to full shares at a later date.
 

Fiat, which still holds a controlling 56 pct stake in Ferrari, has recently turned its operations around with almost every division in the group, including the previously struggling Fiat Auto arm, reporting turnover and profit rises during the first quarter of 2006 in detailed figures released to the markets on Wednesday. It has also plunged back into the bond market to raise additional finance. However, although the Group's share price has doubled in the last year, the stock still remains at the bottom of credit and investment ratings and the financial markets would be wary of Fiat spending its cash to rebuild its Ferrari position. As such a 'compromise' solution is the most likely path forward.

Since Mediobanca took up its stake in Ferrari the structure of the organisation has significantly changed. Previously responsible for re-launching the Maserati operation, Ferrari were unable to sustain the major investment required to turn the Trident brand fully around and it has been since returned to Fiat Auto's control. Ferrari have now raised annual production to above 5,000 cars and this is expected to rise further as they expand into lucrative new emerging markets such as China, India and Russia. Ferrari have also continued to roll out their 'Ferrari Store' format and enter into a swage of licensing agreements as they seek to maximise the value of one of the world's most important brand names.