UPDATE 2-Fiat's parent pockets 1.5 bln euros from SGS stake sale

Mon Jun 3, 2013 5:46am EDT

* Exor sells 15 pct stake in SGS for total 2 bln euros

* Deal seen connected to Fiat's planned Chrysler deal

* Exor wants to keep 30 pct Fiat stake in any share issue (Rewrites first paragraph, adds analyst comment, Exor NAV, detail and background)

MILAN/BRUSSELS, June 3 (Reuters) - Carmaker Fiat SpA's parent company pocketed a net 1.5 billion euros ($2 billion) from a disposal on Monday, in a move analysts said could help lay the ground for Fiat's looming purchase of the rest of Chrysler.

Exor, a holding company run by a scion of Fiat's founding Agnelli family, said it sold its 15 percent stake in Swiss inspection company SGS to Belgian conglomerate Groupe Bruxelles Lambert (GBL).

The sale is part of plans by Exor Chief Investment Officer Shahriar Tadjbakhsh to boost the value of Exor's 8.3 billion euro investment portfolio, by concentrating on large stakes in companies such as Fiat with a global reach.

Exor, which also controls truck maker Fiat Industrial SpA , had been an investor in SGS for 13 years. It said it had sold its stake for a total of 2 billion euros ($2.6 billion), having bought it for some 500 million.

Investors saw the move as connected to Fiat's plan to buy up the 41.5 percent of U.S. carmaker Chrysler that it does not already own, an acquisition likely to cost around $4 billion but whose final bill has not yet been determined.

The deal would likely be accompanied by a share issue by the maker of cars ranging from 500 hatchbacks to Ferrari supercars.

Exor has said it would want to take part in any share issue to preserve its 30 percent Fiat holding and not let it be diluted.

"This transaction could seem like Exor wants to raise cash ahead of an investment in Fiat-Chrysler in the event that Fiat needs to bolster its equity, as it brings its stake in Chrysler to 100 percent," said Luca Arena, an analyst at ICBPI brokerage in Milan, in a note.


Exor and Fiat Chairman John Elkann, a descendent of Fiat co-founder Giovanni Agnelli, last week signaled his determination that Exor's stake in Fiat would not be watered down in the Chrysler merger, which Fiat Chief Executive Sergio Marchionne has said may be partly funded by a share issue.

Elkann, a member of the family which has owned the Italian carmaker since 1899, was quoted as saying Exor would use between 1.2 billion euros and 1.3 billion already on its balance sheet to keep its grip on the future merged carmaker.

Despite the prospects for a capital increase, Fiat shares held on to last week's gains and were trading at 6.12 euros early on Monday, near their highest level since August 2011.

When companies announce a capital increase, their shares usually fall as investors anticipate the cost of taking part or the risk of being diluted, but some analysts say Fiat's recent resilience shows support for the Chrysler deal.

"The market is showing it's ready for this capital increase, because Fiat is buying up a strategic asset," said one analyst in London.

For GBL, run by Belgium's richest man Albert Frere, the move is part of a diversification strategy. The company in January raised cash for investments to expand its portfolio by selling exchangeable bonds worth almost 1 billion euros, representing almost half its stake in French energy GDF Suez.

GBL, which also holds 21 percent of cement company Lafarge and 4 percent of oil major Total, will become the second-largest shareholder in SGS after the von Finck family.

SGS, a specialist in inspection, verification and testing services for industries as diverse as agriculture and life sciences, could not immediately be reached for comment.

Shares in GBL were down 1.3 percent at 60.28 euros by 0907 GMT, while Exor shares were up 2.6 percent at 25.26 euros.

Holding companies typically trade at a discount to the assets in their portfolio. Exor's market value was 6 billion euros as of Friday's close, so is trading at about a 30 percent discount to its portfolio value.

"The stock is up because when Exor sells an asset like SGS for cash, the discount on its SGS stake disappears and that boosts the stock price," said UBS analyst Philipe Houchois. ($1 = 0.7716 euros) (Reporting by Jennifer Clark and Lisa Jucca in Milan, with Ben Deighton in Brussels and Caroline Copley in Zurich; Editing by David Holmes)

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