Set to be its own master within a year’s time, Ferrari must first pay its dues before freedom calls, all to the tune of €2.25 billion ($2.8 billion USD).
Automotive News Europe reports the payment will come from a sorting of affairs between the brand and parent company Fiat Chrysler Automobiles, consisting of “distributions and transfers of cash from Ferrari” among other transactions prior to the October 2015 separation.
CEO and Ferrari chairman Sergio Marchionne says 10 percent of the sports car brand will be made to the public between Q2 and Q3 of 2015, while 80 percent will be given to FCA’s investors; brand vice chairman Piero Ferrari will hold onto the remaining 10 percent.
The spinoff is part of an overall capital raising plan, which includes a $2.5 billion convertible bond set to mature in 2016, and underwritten by JPMorgan Chase, Goldman Sachs, Barclays and UBS. The plan will net FCA approximately €4 billion ($5 billion).
Good, more money to develop Hellcats and Jeeps, I approve
What if it goes into European-made Alfa? Or Brazilian Fiats? Here, $2.8 billion will get you two new models and 2-3 mid-cycle refreshes, or 3-4 “new” models substantially based on existing models. Or another “deal” that has nothing to do with cars, but everything to do with keeping Fiat afloat. The question is, what’s Sergio going to do with that money?
The money will be used to bolster the balance sheet. That added value can be monetized in the form of debt capacity and/or additional shares issued.
Big picture, I expect FIAT is planning for another acquisition.
Smart move for FCA, will they be able to divest themselves of the excess production capability in Italy? One thing about Marchionne, he’ll see to it the products continue to improve.
I’m still bummed Luca is out. I hope this move ends up bringing him back and taking Marchionne out of Ferrari’s picture. I don’t like what Marchionne is doing and don’t have faith that he will be able to follow up on Luca’s phenomenal leadership run with Ferrari.
Not criticizing Luca, but selling increasingly expensive goods during a period of massive wealth transfers to those in the market from such from everyone else, kind of muddles what can reliably be learned from Ferrari’s success.
The beauty of being part of a broad market conglomerate, is that you’re less exposed if/when your narrow niche market is no longer asymmetrically favored by external factors. I wish Ferrari the best, and kind of like pure plays over hairballs in theory, but there is a chance FCA is letting Ferrari go at a cyclical top, leaving them to fend for themselves at the beginning of period when they will be less able to do so.
That is dirt cheap. I would guess their brand equity at $10B, plus the actual and financials. If the Apple is worth north of $20B for that cute little bitten piece of fruit, how much is the prancing horse on your product worth to the great unwashed?
It’s not being sold flat out, it’s just becoming independent from FCA. You can’t consider this a retail deal like Volvo being sold to Geely.
What does Ferrari have to sell to the very, very large percentage who can’t afford their cars? Licensed merchandise and revenue from the F1 fan base. That’s it. There are a hell of a lot of more Apple users spending a whole lot more money per customer than non-Ferrari-driving Ferrari customers. Also, does Ferrari own a major share of the music business and does Ferrari have plans to move into banking?
That’s why Apple is worth so much more than Ferrari.
This has got to be the dumbest Apple(s) to (prancing) Horses comparison.
Apple products are produced by the Chinese at slave labor wage levels, then marked up, what, 500-percent (?) of what the actual parts/labor costs.
Apple would like to sell as many iPhones, iPads and MacBooks as possible, while Ferrari deliberately limits production to 7000 or so.
And why should we care if Ferrari doesn’t own a music business or a bank.
Last, stock prices are often as not NOT a measure of a company’s true worth but the Perception of its worth. That’s why Amazon’s stock was doing well even if the company wasn’t very profitable.
Anyone who can’t see that Apple is worth giant piles of money compared to a “brand” that produces expensive toys for a very limited market and entertainment to a larger (but still limited) market really doesn’t get it.
Much of the world’s wealth is created by low-cost labor, what does that have to do with the original premise that Ferrari is worth anything near what Apple is worth?
Apple is sitting on a cash hoard measured at over one hundred billion dollars. That’s CASH. Where did that cash come from? You might have actually thought about before you posted, but it’s too late for that.
If you had used Tesla as an argument for the disconnect between share price and actual value, you might have had a chance of sounding more convincing. Amazon, on the other hand, is becoming a de facto monopoly in what used to be called mail order. That you discount the importance of that also speaks of your lack of real-world understanding of where big wealth comes from.
“And why should we care if Ferrari doesn’t own a music business or a bank.”
Because we’re speaking of money-making potential (which is what value is really about), this matters very much. Remember Superman IV? Where Richard Prior changes the computer program to give him fractions of a cent of the company transactions then drive up in a Ferrari that he bought with the proceeds? If Apple succeeds in moving in on the purchase transactions market (where they stand to make a few pennies on a large percentage of every electronic retail transaction) the way that they moved in on the music-buying business, they stand to become far wealthier.
That was Superman III, Superman IV was about a quest for plot, err peace.
Did I dispute that Apple is worth a lot of money? Or that it has a lot of cash? No. And where it got the cash from –the iSheep– is irrelevant. Ferrari gets its money from people, too.
Again, so what if Apple is succeeding in areas where Ferrari doesn’t participate? It means nothing to what FERRARI is worth. I didn’t make any comparisons –someone else did.
You are the one who brought up all of these irrelevant and invalid comparisons. What does electronic cash transactions have to do with anything?
Maybe, just to make you happy, Apple should use the money it’s hoarding overseas to buy Ferrari.
Oh, and it’s clear you’re an iDiot.
Great, now Ford can finally buy them.
GAWD… I hope not!
Thanks, just spit coffee all over my keyboard
So that Ford can then sell Ferrari to the Chinese during the next cyclical downturn? No, thanks…
Chinese will own Ferrary sooner or later like you it or not. And they will own Ford too with LMC. And White House. Administration will rent it.
There are two key paragraphs here:
” Ferrari must first pay its dues before freedom calls, all to the tune of €2.25 billion ($2.8 billion USD)”
and:
“The plan will net FCA approximately €4 billion ($5 billion).”
So the total for FCA will be US$7.800.000.000?
Wow. Sergio is one shrewd automotive CEO!
Marcelo said this wouldn’t happen, and they have been discussing this for years but it WOULD NOT HAPPEN.
But it is!
Mr. Marchionne sure knows where to find value and find someone to pay it. He got a pile from GM and saved Fiat’s bacon. Now he plans to sell Ferrari. What will he sell after that pile of money runs out, and he needs to save Fiat’s bacon again?
Nothing, Marchionne will not live forever to bail out FIAT over and over again. FIAT will become, lets say it – Chinese.
Don’t car companies have fleet average CO2 emission standards in the EU? Isn’t that why Mercedes-Benz and BMW sell econoboxes? Isn’t it why there was an Aston Martin iQ? Porsche, Audi, Bentley, Bugatti, and Lamborghini have SEAT, Skoda, and VW to offset their emissions, but what will an independent Ferrari do?
Ferrari 500?
Ferrari’s customers will pay the fines, which will be included in the price. Audi, Mercedes and BMW are volume luxury, Ferrari is not, and its customer base buys Audis, Mercedes, and BMWs as knock-around, everyday commuters.