Fiat Said to Mull Marelli Options After Samsung Talks Endby and
Fiat Chrysler may spin off Marelli at end of 2018 Plan
Car parts unit could follow same route as Ferrari with IPO
Fiat Chrysler Automobiles NV is evaluating options for its car-parts unit Magneti Marelli, including a Ferrari-style spinoff, after talks with Samsung Electronics Co. over a partnership broke down amid the Korean company’s smartphone crisis, according to people familiar with the matter.
Fiat Chrysler and Samsung also remain far apart on their valuations of Marelli, prompting the carmaker to consider other options for the division, the people said. An eventual separation of the business from Fiat Chrysler isn’t expected before the end of the group’s current business plan in 2018, they said. Fiat declined to comment, while Samsung said via e-mail that the company doesn’t comment on rumors or speculation.
Marelli may follow the same path of Ferrari NV, which was separated from Fiat at the beginning of the year after a 10 percent stake was sold in an initial public offering and listed on the New York Stock Exchange in 2015, the people said. Ferrari was valued at about 10 billion euros ($10.9 billion), including debt, in the IPO.
Marelli could be worth as much as 5 billion euros after Chief Executive Officer Pietro Gorlier, an aide of Fiat CEO Sergio Marchionne, completes his turnaround plan for the company, one of the people said.
Fiat shares rose as much as 3.4 percent in Milan trading, the best performer among European auto stocks, to the highest level in three months and were trading up 2.9 percent to 6.395 euros at 3:08 p.m., valuing the company at 8.2 billion euros.
After calling off efforts to pursue a merger with General Motors Co., Marchionne has made Fiat’s 2018 targets, which include more than doubling profit and eliminating debt, his highest priority before he leaves his post in 2019. He has said Fiat will be in a better position to discuss a deal to combine with another automaker after completing his five-year strategy. A separation of Marelli could help to highlight the value of its businesses.
Fiat increased its 2016 profit forecast on Tuesday for the second time this year, boosting the target after third-quarter earnings jumped 29 percent on the Jeep brand’s global expansion. When asked on a conference call with analysts about the stalled talks with Samsung, Marchionne said no deal is expected by the end of 2016.
“There are a continuous number of approaches from a variety of sources that are potentially interested in combinations with some of our assets,” Marchionne said on the call. "Based on what I know today, there is nearly 100 percent certainty that no deal will happen in the fourth quarter of this year."
Samsung was in advanced talks to buy some or all of Marelli, people familiar with the matter said in August. The deal could have been worth more than $3 billion with a goal of closing this year, one of the people said at the time. Fiat Chrysler Chairman John Elkann confirmed in September that the carmaker was holding talks to strengthen Magneti Marelli with several potential partners, including Samsung. Its vice chairman Lee Jae-yong sits on the board of the Agnelli family’s holding company Exor SpA, the largest investor in Fiat Chrysler.
Lee officially joined a nine-person board at Samsung on Thursday as the Asia’s biggest technology company reported a 17 percent slump in third-quarter profit after the demise of its fire-prone Galaxy Note 7 line threw the world’s largest smartphone maker into disarray. The move will give the low-profile executive a big say over management and strategy, including restructuring, mergers and asset sales.