Desperate to cut its rising debt load, Fiat group will sell a minority stake in Ferrari SpA at the end of this year - one year earlier than expected.
Fiat Chairman Paolo Fresco said the group would keep 51 percent of the super-luxury sports car maker, which is based in Maranello, Italy. He said the stock sale would combine the sale of shares owned by Fiat with an increase in Ferrari's capital.
Fiat expects to raise at least E750 million by selling the stake. The size of the capital increase was not announced.
Fiat controls 90 percent of Ferrari. The remainder is owned by Piero Ferrari, son of company founder, Enzo Ferrari. A Ferrari spokesman said Piero Ferrari has not yet decided how much of his 10 percent stake to retain.
Asked how Fiat calculated that it can raise E750 million, Fresco said: 'Ferrari is Ferrari, you cannot compare it to anything else. In my entire career, I never saw so many banks willing to participate in a company's IPO [initial public offering], also saying price is not a problem.'
Ferrari Chairman and CEO Luca di Montezemolo said the IPO 'represents the recognition of the results we achieved in the last decade, where we increased revenue three-fold by internal growth only.'
The funds will be used to finance growth at Ferrari and Maserati, which is controlled by Ferrari SpA. Monies will also be used for the opening of new factory stores outside Italy and the creation of theme parks, beginning with the one planned in Maranello.
In 2001, Ferrari reported consolidated revenue of E1.06 billion, an operating profit of E62 million and net earnings of E47 million.
The stock sale will also help Fiat group reduce its mounting debt. Fresco restated the group's plan to cut net debt from E6 billion at the end of 2001 to E3 billion by year-end. Despite a E1.02 billion capital increase in January, Fiat group's net debt rose another 10 percent to E6.6 billion in the first quarter of 2002.
Indeed, a plan to sell assets is not proceeding as expected. In December 2001, Fiat put the remaining pieces of its Magneti Marelli components arm up for sale, plus production-systems subsidiary Comau and Teksid, the metal components maker. But no buyers have been found for the subsidiaries.
All three reported operating losses in the first quarter, making more it difficult to obtain an attractive price.
Meanwhile, Fiat group results show no signs of improvement. In the first quarter, operating losses amounted to E299 million, compared with a E125 million profit a year before. A net loss of E529 million compares with a net profit of E193 million in the same period in 2001.
The forecast for the full year is to reach breakeven at the operating level only. The size of the net loss will depend on how much extraordinary income from asset sales could balance interest costs. Last year, interest charges were more than E1 billion and totaled E275 million in the first quarter.
Group results continue to be weighed down by the crisis at Fiat Auto. In the first quarter, Fiat Auto unit sales fell by 14.9 percent to 518,000 units. Revenue declined 11.2 percent to E5.99 billion and the operating loss jumped from E16 million to E429 million.
In such an environment, Fresco said Fiat Auto will concentrate on its own recovery plan and will not be one of the General Motors affiliates participating in Daewoo's rescue plan.