Exclusive: Banks approach Fiat on HK IPO for Ferrari

HONG KONG Thu Sep 1, 2011 9:01am EDT

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HONG KONG (Reuters) - Several investment banks have approached Fiat SpA FIA.MI in recent weeks with a proposal to list legendary sports car maker Ferrari on the Hong Kong stock exchange, sources with direct knowledge of the matter told Reuters.

A potential initial public offering could value Ferrari as high as $6.3 billion, according to some analysts. The deal would help Fiat raise funds to pay down its debt of around 5 billion euros ($7.2 billion) and could also boost the valuation of the Italian company's shares.

"Fiat hasn't made up its mind yet about the IPO, but it's certainly talking with banks about it," said one source, who declined to be named because the discussions are private.

Some meetings had been held and several others had been lined up in coming weeks to drum up support for the potential offering, four sources said.

A Fiat spokesman declined to comment when asked if meetings had been held with banks about a possible Ferrari offering. The spokesman referred to comments by Fiat Chief Executive Sergio Marchionne, repeated several times in the past few months including last week, that a Ferrari IPO "is not on the table" for the time being.

Last year, Fiat -- which owns U.S.-based Chrysler -- said it was considering an IPO for Ferrari as a strategic option and speculation has grown ever since. Still, Ferrari Chairman Luca Cordero de Montezemolo and Fiat's Marchionne have recently sought to play down a potential deal.

"It's more real than you'd think," said another banker who had met with Fiat.

Hong Kong, the world's top destination for IPOs for the last two years, has become the venue of choice for global brands such as cosmetics company L'Occitane International (0973.HK) and luggage maker Samsonite International SA (1910.HK), seeking top valuations and deep pocketed investors. Fashion house Prada SpA (1913.HK) raised nearly $2.5 billion in June, becoming the first Italian company to go public in Hong Kong.

A Ferrari offering would also be a coup for Hong Kong, which recently lost out to rival Singapore on the IPO for English Premier League champions Manchester United MNU.UL, worth up to $1 billion.

ROSSO CORSA

The sports car maker's history dates back to 1929, when Enzo Ferrari founded the Scuderia Ferrari racing team. Its first car, the 125 S, was produced in 1947 and the company's mystique has grown ever since, with its "rosso corsa" (race red) colored cars becoming a status symbol around the world for celebrities, royalty and the wealthy.

As with Prada, LVMH (LVMH.PA) and other luxury goods companies, Ferrari has seen a booming market of its sports cars in China, the world's second-largest economy. The company said in January it expects China to become its second largest market after the United States in a few years.

Sales of so-called ultra-luxury cars including Rolls Royces, Bentleys and Ferraris have surged at a compounded rate of 57 percent a year from 2006-2010 and are expected to double in 2011 from 2010, according to KGI Securities forecasts. Sales should grow above 50 percent a year for the next three years because of an increase in millionaires in China and aggressive expansion by the car dealers, the brokerage added.

Barclays Capital last week introduced a holding company discount at Fiat of 25 percent because "there is a significant amount of Ferrari value locked within the group structure."

An IPO using similar multiples pegged to luxury goods companies could value Ferrari at about 4.4 billion euros ($6.3 billion), or almost 1 billion euros more than current estimates, Italian bank UniCredit said in a July report.

That higher value would boost the target price for Fiat by 0.7 euros, UniCredit estimated.

($1 = 0.695 Euros)

(Additional reporting by Gianni Montani in TURIN; Editing by Chris Lewis and Lincoln Feast)

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