Ferrari IPO said to be on track to sell out

Tommaso Ebhardt and Manuel Baigorri
Bloomberg News

Ferrari SpA’s ability to sell racy sports cars at high prices has carried over to the company’s initial public offering, even as investors unload other auto stocks in response to Volkswagen AG’s diesel scandal.

Based on talks with potential investors, Ferrari is on track to garner the 10 billion-euro ($11.2 billion) value that Chairman Sergio Marchionne sought before the Volkswagen crisis broke, said the people, who asked not to be identified because the arrangements are private. Initial requests for the stock may exceed the amount available by more than 10 times, one of the people said.

Marchionne, who’s also chief executive officer of Ferrari parent company Fiat Chrysler Automobiles NV, has insisted for months that the brand should be valued as a luxury-goods maker, such as clothiers Prada SpA or Hermes International SCA, and not as an auto manufacturer. Those companies trade at over 20 times earnings, more than twice the average valuation of carmakers. Ferrari is working out details of its debut on the New York Stock Exchange in the second half of October as planned, the people said. A price range hasn’t yet been set.

European carmakers have lost about $50 billion in market value since Wolfsburg, Germany-based Volkswagen admitted on Sept. 18 that some of its diesel engines are equipped with software designed to circumvent emissions tests in laboratories. Volkswagen’s shares have plunged 40 percent in the period, while Paris-based PSA Peugeot Citroen’s have dropped 14 percent and Fiat Chrysler stock traded in Milan has fallen 9 percent. German auto-parts supplier Schaeffler AG, which is also planning an IPO, has been fielding questions from potential shareholders over the Volkswagen scandal, according to people familiar with that transaction.

Preliminary talks show the 10 percent Ferrari stake Fiat Chrysler is putting on the market in the IPO could be valued at about 1 billion euros, the people said. About half the full business’s expected 10 billion-euro value is based on the strength of its brand, said one of the people.

Ferrari, which will be listed in New York under the ticker FRRI, will be fully separated from Fiat Chrysler at the beginning of next year as the London-based parent company distributes its remaining 80 percent to shareholders. Vice Chairman Piero Ferrari, the son of founder Enzo Ferrari, will keep his 10 percent holding.

The disposal is part of Marchionne’s strategy to raise about $5 billion for Fiat Chrysler to cut debt and help fund a 48 billion-euro investment program that focuses on expanding the Jeep, Alfa Romeo and Maserati brands globally. The Ferrari spinoff could generate more than 3 billion euros for Fiat, including proceeds from the IPO and a cash payment exceeding 2 billion euros from the Maranello-based unit. The Agnelli family that controls Fiat Chrysler is also set to keep voting control of Ferrari.

More than half of cars sold in Europe are equipped with diesel engines. Ferrari CEO Amedeo Felisa said this month that the maker of the 235,000-euro 488 Spider convertible will avoid adding models, such as battery-powered vehicles, outside its traditional sports cars because its customers prefer powerful autos with a traditional engine growl.