June 20, 2014 at 7:21 pm

Fiat to sell $820M in holdings to invest in upscale brands

Fiat SpA plans to sell holdings valued at about 602 million euros ($820 million), freeing up cash to invest in an expansion of its upscale brands

Fiat holds 3.5 percent of its own shares as well as 2.5 percent of truck and tractor maker CNH Industrial NV and intends to sell the assets to American investors, Chief Executive Officer Sergio Marchionne told reporters Thursday in Basildon, England. The effort would help build relations on Wall Street as the carmaker prepares to establish its primary listing in New York in the first two weeks of October following the creation of Fiat Chrysler Automobiles NV.

The merged company is targeting more than doubling profit and lifting annual deliveries 61 percent over the next five years. Those targets are underpinned by a 55 billion-euro investment plan that calls for expanding the upscale Maserati and Alfa Romeo brands as well as make Jeep a global nameplate. Chrysler’s rebound from bankruptcy under Fiat is central to Marchionne’s effort to gain the support of investors.

“The Chrysler story is one investors have followed from the beginning,” said the CEO, who is spending about one-third of his time in the U.S. versus 25 percent in Fiat’s native Italy. “We were the poor kids, Cinderella at the ball. People in the U.S. actually like that. They like what happened. We paid all the money back and it was clean.”

While such an approach might appeal to casual and retail investors, it’s unlikely to sway sought-after institutional shareholders, Richard Hilgert, an analyst with Morningstar Inc. in Chicago, said in an interview.

“The Fidelitys, the Putnams, the Vanguards of the world are going to be looking more for solid investment reasons in the funds, the numbers, the cash flow of this company and what the potential is based on management’s vision,” he said. “That’s what’s going to be more important to most of the investors in the U.S.”

In a sign of progress on the CEO’s strategy, the Maserati brand will double its dealership network to about 500 by 2015 to sustain growth for models like the $66,900 Ghibli, Harald Wester, the luxury brand’s chief, said in an interview with Bloomberg Television Thursday. The exotic carmaker expects to match 2013’s full-year deliveries of 15,400 vehicles already by the end of June lifted by its expansion.

Marchionne said Fiat and the CNH Industrial business — which makes New Holland and Case tractors and Iveco trucks and is already listed in New York — must work to lift liquidity.

“We need to spend time talking with investors to get them buying in Europe and trading in the U.S.,” he said at CNH’s U.K. base. “You’ve got to see them all more than once, spend a day in Boston, whatever. It’s going to take more than a year, but Chrysler is a household name in the U.S. and that helps.”

Fiat bought full control of Chrysler in January, with the merger part of Marchionne’s decade-long effort to turn the Turin-based company into a carmaker big enough to challenge General Motors Co., Volkswagen AG and Toyota Motor Corp.

The Italian automaker plans to move its primary listing to the New York Stock Exchange from Milan after shareholders meet to approve the combination in the third quarter. Fiat’s board formally signed off on the formation of FCA earlier this week.

Fiat plans to raise as much as 4 billion euros by issuing new bonds by the end of 2015, providing flexibility to refinance debt as it implements the merger, the automaker said June 15.

A plan to expand Alfa Romeo requires the upscale brand to establish its credibility “one car at a time,” Marchionne said.