Fiat Chrysler to sell up to 100 million shares, spin off Ferrari – Detroit Free Press
Shares of newly listed Fiat Chrysler Automobiles soared as much as 18% today after the company announced it would spin off exotic car brand Ferrari in 2015, offer up to 100 million shares of stock on the New York Stock Exchange before the end of this year.
Both actions could help the automaker reduce its debt and meet Fiat Chrysler CEO Sergio Marchionne’s aggressive five-year plan to dramatically increase sales from 4.4 million to 7 million worldwide in 2018.
“The board supports management’s determination that this transaction represents FCA’s best course of action to support the long-term success of the Group while at the same time substantially strengthening FCA’s capital base,” Marchionne said of the decision to spin off Ferrari.
The company said it plans to sell 10% of Ferrari’s shares in a public offering and offer 80% to existing Fiat Chrysler shareholders. The remaining 10% of Ferrari is owned by Piero Lardi Ferrari, the second and only living son of founder Enzo Ferrari.
In addition to the Ferrari spinoff, the automaker said it plans to offer up to 100 million shares of Fiat Chrysler stock on the open market before the end of this year.
In addition, Fiat Chrysler will issue other securities valued at a total of $2.5 billion that will eventually converted into Fiat Chrysler common shares.
All told, Marchionne estimates that the transactions will raise 4 billion euro ($5.1 billion) for Fiat Chrysler.
Marchionne said Fiat Chrysler’s board of directors wanted to find a way to reduce the company’s debt so that it could withstand a major global economic crisis. Analysts have often raised concerns about the company’s $14 billion in industrial debt.
“It is really designed to deal with the worst case scenario,” Marchionne said.
Separating Ferrari from Fiat Chrysler, Marchionne said, will help both companies because investors will be more able to value each company separately even though Marchionne plans to remain the chairman of Ferrari.
“This was an act of purification on our side,” Marchionne said during a conference call. “It was one more step…in a long journey that started in 2004.”
All of the the transactions were approved by the Fiat Chrysler board today, and were embraced by the market. The company’s shares were trading at $11.25 per share at 9:40 a.m.
Fiat Chrysler also said today it earned a profit of 188 million euro ($239 million) for the three months ending Sept. 30, or about 1 million euro ($1.27 million) less it earned for the same period last year.
The automaker, which was officially renamed itself and began trading on the New York Stock Exchange earlier this month, also confirmed its guidance for the year.
The company said it still expects to earn a profit of about 600 million euro ($763 million) to 800 million euro ($1.2 billion) this year as it sells about 4.7 million cars and trucks globally.
The company maintained its guidance despite slowing car sales in South America and European economic outlook that is growing worse.
“The Group’s third-quarter results demonstrate a solid performance in the face of challenging market conditions particularly in Latin America,” said Marchionne, “We are on track to deliver on our full-year targets for 2014. With the formal creation of FCA and its debut listing on the NYSE, we have embarked on a new phase as a global company with even greater possibilities.”
FCA said total revenue of 1.1 billion euro ($1.4 billion) during the third quarter, up from 1.0 billion euro ($1.27 billion) for the same period last year.
The automaker sold 1.1 million cars and trucks worldwide during the third quarter, up 10% from the same period last year.
Stock of the new company began trading on the New York Stock Exchange on Oct. 13. Before today, the highest close was $9.74 per share on Tuesday.
The company’s debut on the stock exchange came one day after Fiat Chrysler Automobiles was formed after passing all of the necessary regulatory hurdles.
The creation of Fiat Chrysler Automobiles completed the integration Marchionne set as his goal in 2009 when Chrysler emerged from bankruptcy with Fiat as its controlling shareholder.
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