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F1 team to get cash injection as FIAT confirms Ferrari stock market floatation

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F1 team to get cash injection as FIAT confirms Ferrari stock market floatation
Oct 30, 2014, 1:02 PM

The Ferrari F1 team is in line for an injection of new cash in its quest to get back to championship winning form, after the board of the recently ...

The Ferrari F1 team is in line for an injection of new cash in its quest to get back to championship winning form, after the board of the recently floated FIAT Chrysler Automobiles gave the go-ahead for a listing on the New York Stock exchange of the Ferrari car company in a few months time.

The USA is Ferrari's largest market with over 2,000 of the total production of 7,000 cars sold there every year.

It is expected that 10% of the company will be listed, with an estimated valuation of £600 million, valuing Ferrari as a business at £6 billion.

FCA CEO Sergio Marchionne, who is also now the chairman of Ferrari, has overseen the move and said yesterday,

"Ferrari a unique business in the world. It has to remain that from a commercial point of view and it has to rediscover that desire to win which is part of its DNA, " Marchionne said. "I have great faith in the men and women working there. We are giving them a real importance, recognising their right to exist independent from the rest. It's a great opportunity to preserve the Italian-ness of the company."

Marchionne

According to the Financial Times, "The IPO announcement was part of a package of measures aimed at reducing FCA’s spiralling net industrial debt, which now stands at €11.4bn, and excludes the company’s financing arm. It also needs to finance a planned $60bn product offensive.

"FCA confirmed it would seek to raise up to $2.5bn by issuing mandatory convertible bonds, which convert into equity."

Observers in Italy suggest that some of the money raised will be invested in the F1 team, which is shortly to move into its new headquarters and factory in Maranello. Ferrari has been outreasearched, out engineered and out performed by Mercedes since the move to hybrid turbo engines and Marchionne has made it clear he wants to see the team turned around as "quickly as possible."

As well as the listing, Marchionne plans to distribute the remaining shares that FCA owns in Ferrari to FCA shareholders. This greatly increases the number of bodies with influence on Ferrari, whereas before it was just FIAT and Piero Ferrari, Enzo's son, who retains 10%. It will dilute Piero's influence, but what Marchionne's end game with this strategy is and what impact that has on the F1 team, only time will tell.

It certainly is a power play and it could have big repercussions on Ferrari's relationship with F1; Marchionne is in a position to play hardball with Bernie Ecclestone knowing that F1 needs Ferrari and will move heaven and earth to keep it.

In a separate development, former Ferrari team principal Stefano Domenicali is to take up a new role at Audi next month, reporting directly to the CEO. Although the indications are that he will be working on special automotive projects, there is inevitable speculation that he is understudying the hugely successful motorsport boss Wolfgang Ullrich who is approaching retirement age.

Audi denied rumours last week that it was planning to switch away from WEC and enter an F1 team in the near future. Another possible route might be to enter as an engine supplier only. The marque has had a long standing relationship with Red Bull.
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