JUNE 7, 2006
FIAT plans to buy back Ferrari
In recent years FIAT has let its control of Ferrari slip to just 56%, selling off shares to help raise money to get the parent company back on track financially. The Ferrari family has always retained 10% of the company but in 2002 FIAT sold 34% to Mediobanca, the Italian investment bank, for $768m, valuing the company at $2.25bn. This was much higher than most analysts believed the company was worth as Mediobanca was a major FIAT creditor andso the move helped to protect the overall Mediobanca investment.
Mediobanca then offset some of its investment by selling shares on to a variety of other banks, notably Commerzbank, Banca Popolare dell'Emilia Romagna and ABN Amro. Last year it sold 5% of the Ferrari business to the Abu Dhabi's state-owned Mubadala Development Company in a deal which valued the company at $2.75bn.
The latest FIAT plan is to exercise a call option that it has on the Ferrari shares at a price agreed in 2002. FIAT has until the end of the month to do this. This would value the company at $3.4bn, a much higher valuation than previously, although it should be noted that the dollar is much weaker than previously. The word in Italy is that FIAT would buy back 29% of the shares, leaving the Mubadala and the Ferrari family as the only other investors and that the purchase would be partially funded by FIAT selling its 1.8% stake in Mediobanca, which is worth around $300m.
If this all goes ahead Ferrari bosses will no longer be able to argue that Ferrari is a small independent team struggling against huge manufacturers - not that this was ever very convincing.
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