A new era began on the
Milan stock exchange this morning as "Fiat" and "Fiat
Industrial" shares began trading separately for the
first time, finally shutting the door on the powerhouse
industrial conglomerate, Italy's largest company, which
was incorporated on July 11, 1899 by Giovanni Agnelli. As a result of the split, the
automotive division, including the stake in the Chrysler
Group, and related supply sectors have been separated
from the CNH Global and Iveco units.
Splitting up the
"empire" has long been touted but until the passing away
of former Fiat Chairman Gianni Agnelli, a colossus who
moulded the Fiat Group into a global player, it was
never a possibility. With the sum of the parts always
worth more than the total, the idea of unlocking value,
and in turn creating lucrative profits for financial
institutions and shareholders alike, would always come
to pass one day. Fiat shares have risen by a half over
the last year as investors have bought into the proposal
to split it into two companies. Traditionally around a
20-25 percent discount has been built into Fiat shares
thanks to its conglomerate status.
The diversion of
attention into the splitting the group has also helped
to mask Fiat's problems during a period when it is also
trying to integrate many of its automotive industrial
functions with the Chrysler Group, itself trying to
return to profitability after emerging for a bruising
bankruptcy process in the summer of 2009. "In the face
of major developments in the market, we could not
continue to keep together two sectors that do not have
any economic or industrial tract in common," Marchionne
said today, reported Reuters, at a special event
at the Milan bourse to mark the dual listing. "The
demerger will allow Fiat and Fiat Industrial to focus on
their own business. Each will be able to follow its own
path," he added.
Marchionne also said that
Fiat is most likely to raise its stake in Chrysler Group
to 51 percent but claimed that he has no plans at
present to merge the two companies. Fiat currently owns
a 20 percent stake in the U.S. automaker and can raise
that further through a series of increments subject to
hitting laid down targets. "If Chrysler is listed this
year, we should think about speeding up the option of
increasing our stake," Marchionne was quoted by
Reuters as saying today.
"I have no plans to
merge Fiat and Chrysler today," Marchionne also said
today, reported Reuters. "I think we have done a
relatively decent job in the last 18 months" in terms of
industrial integration of Fiat and Chrysler, he said,
adding that "a legal merger is not going to change our
lives."
The new Fiat
Industrial entity meanwhile, which encompasses
agricultural and construction equipment maker CNH Global
and trucks and buses division Iveco as well as some
industrial units of Fiat Powertrain Technologies, has
been handed substantial Fiat Group debt onto its new
balance sheets but is expected to attract interest and
is likely to be broken up or taken over in the near
future. Fiat itself will have to seek ways to raise cash
to increase its stake in Chrysler and an IPO of Ferrari
is considered a favourite option. A sale of Fiat's
Magneti Marelli lighting and electronic components
division has also been touted in recent months but as
this is an almost captive division it isn't clear how
this could be achieved.
