It’s no secret that Magneti Marelli, which is owned by Fiat Chrysler Automobiles (FCA) has often been talked about in the takeover business as a ripe target. Till now, FCA has resisted the idea, but it seems soon there could be change of heart as FCA Chief Executive Sergio Marchionne prepares an agenda to ‘unlock’ value at Magneti Marelli, in particular. According to market watchers Magneti Marelli along with robotics specialist Comau and castings firm Teksid could be worth between US$4.4-6.1 billion.
The spin-off is part of a plan by Marchionne to “purify” the Italian-American carmaker’s portfolio. In fact, the FCA CEO has greenlighted the company board to proceed with spinning off Magneti Marelli and distributing shares in a new holding for 99-year old parts business to FCA investors.
“The separation will deliver value to FCA shareholders, while providing the operational flexibility necessary for Magneti Marelli’s strategic growth in the coming years,” Marchionne.
FCA’s finance advisors initially looked at a possible initial public offering for the business to raise cash to cut FCA’s debt, but the Agnelli family – FCA’s main shareholder – were put off by low industry valuations and did not want their stake in Magneti Marelli to be diluted.
The Magneti Marelli separation is expected to be completed by the end of this year or early 2019, with shares in the company expected to be listed on the Milan stock exchange. The spin-off is subject to regulatory approvals, tax and legal considerations and a final approval by the FCA board with provision for pull out also included.