After spending several years toying with selling its Magneti Marelli division, Fiat Chrysler Automobiles (FCA) has announced today that it will separate the components business and list it on the Milan bourse with the new shares being distributed to existing FCA shareholders.
A statement issued by FCA read as follows: “The Board of Directors of Fiat Chrysler Automobiles N.V. announced today that it has authorised FCA management to develop and implement a plan to separate the Magneti Marelli business from FCA and to distribute shares of a new holding company for Magneti Marelli to the shareholders of FCA.
“The separation is expected to be completed by the end of 2018 or early 2019 and shares of Magneti Marelli are expected to be listed on the Milan stock exchange,” the press release added.
Magneti Marelli was founded in Italy in 1919 to produce ignition magnets for the automotive and aviation sectors and is today focused on the design and production of systems and components for the automotive sector with a focus on lighting and electronics. The company is headquartered in Corbetta, Milan and supplies all the leading car makers in Europe, North and South America, and Asia.
Turnover in 2016 amounted to 7.9 billion euros and it has around 43,000 employees, 86 production units and 14 R&D Centres with a presence in nineteen countries, namely Italy, France, Germany, Spain, Poland, Czech Republic, Russia, Serbia, Slovak Republic, Turkey, the United States, Mexico, Brazil, Argentina, China, Korea, Japan, India and Malaysia.
Magneti Marelli has long been up for grabs as one of the few valuable assets that FCA still has to sell to raise funds. Two years ago, Korea’s Samsung Electronics held talks with FCA over acquiring Magneti Marelli, however these fell through as it reportedly only wanted parts of the company.
While FCA perpetually requires cash, media reports today suggest that FCA’s biggest shareholders, the Agnelli family, resisted selling the company due to low components sector valuations as well as diluting their presence in Magneti Marelli, preferring to retain a majority stake through a separate listing.
As the break-up of the once mighty Italian carmaker continues, Magneti Marelli divestment follows on from previous separations of CNH Global and Ferrari.
“The separation will deliver value to FCA shareholders, while providing the operational flexibility necessary for Magneti Marelli’s strategic growth in the coming years. The spin - off will also allow FCA to further focus on its core portfolio while at the same time improving its capital position,” FCA CEO Sergio Marchionne said in a statement. “A separation of FCA and Magneti Marelli is a key ingredient of the 2018 - 2022 Business Plan which will be communicated in June,” Marchionne continued, “the FCA Board of Directors are confident that this separation is the proper next step, and will be beneficial for Magneti Marelli, FCA and our shareholders . ”
The Press release added: “The separation of Magneti Marelli will be subject to customary regulatory approvals, tax and legal considerations, final approval of the transaction structure by the FCA Board of Directors and other customary requirements. FCA may, at any time and for any reason, modify or terminate the proposed transaction, and there can be no assurances regarding the ultimate timing or completion of the proposed transaction.”