16.11.2010 MAGNETI MARELLI AND FERRARI JOIN ALFA ROMEO IN THE FIAT GROUP FUNDRAISING EQUATION

ALFA ROMEO GIULIETTA MULTIAIR QUADRIFOGLIO VERDE

Fiat Group might sell its Magneti Marelli components division and bring its Ferrari division to an IPO as it seeks to hurriedly raise funds to both pay back major debts and fund a substantial increase in its minority stake in Chrysler Group as it seeks to integrate the two companies.

Fiat Group CEO Sergio Marchionne met analysts last Friday to outline the latest moves in his ever chopping-and-changing plans to break up the century-old Fiat Group, generate value, and create a new automotive company that will be merged into the Chrysler Group to unlock the economies of scale and global reach that he perceives as being vital for the future.

According to Morgan Stanley's financial analyst Stuart Pearson yesterday: "We left Turin with the clear message that Fiat and Chrysler will become one company." Meanwhile Deutsche Bank's analyst at the meeting added that: "Marchionne aims to have one single listed unit between Fiat and Chrysler before the end of 2014."

"Marchionne identified a Ferrari initial public offering and Magneti Marelli disposal as potential sources of cash, without giving a timeframe, said Credit Suisse analyst Eric Hauser in an interview yesterday reported Bloomberg, while: "A Ferrari initial public offering and potential Marelli disposal may need to come first, according to management," added Morgan Stanley's Pearson. How the Magneti Marelli components division could be offered for external sale when it is almost totally reliant on the Fiat Group for its sales and revenue wasn't explained.

Fiat Group actually sold a five percent stake in Ferrari to Abu Dhabi's investment group Mubadala Development Co. the last time it was cash strapped in the middle of the last decade when it was hastily trying to raise funds, and reportedly the buy-back option on this sale was exercised during the third quarter of 2010 at a cost of 122 million euros. Marchionne was in Abu Dhabi at the weekend, along with other Fiat Group board members, to hopefully see Scuderia Ferrari wrap up the F1 World Drivers' Championship title, a scenario that dramatically didn't play out to plan during Sunday's grand prix. The return of the five percent stake increases Fiat's shareholding to 90 percent and it could float 39 percent of the Group's most valuable division to raise funds while still retaining overall control.

With the VW Group waiting in the wings to pick up the Fiat Group's Alfa Romeo division, and the deal now just awaiting being given the green light, the tone from senior management yesterday was noticeably different to recent comments. From a steady stream of outright denials, with just last week the proposal being described as being no more than a "dream", it was notable that Morgan Stanley's Pearson reported that Alfa Romeo was now available at "a very high price."
 

2010 Interfuture Media/Italiaspeed