Ferrari's coveted status as a maker of cars for the super rich is helping push up its value in an initial public offering to as much as €11 billion ($17.1 billion), according to people familiar with the matter.
Based on talks with possible investors, Ferrari could be valued from just under €10 billion to €11 billion when owner Fiat Chrysler sells a 10 per cent stake in the division on the New York Stock Exchange, according to the people, who asked not to be identified because the arrangements are private.
An IPO price range will be published in an updated filing as early as Friday, and presentations to possible buyers are slated for next week, said the people. The valuation may change amid market volatility since Volkswagen's diesel-testing scandal emerged last month, they said.
Fiat Chrysler Chief Executive Officer Sergio Marchionne, who's also Ferrari's chairman, has insisted for months that the brand should be valued as a luxury-goods maker, such as clothiers Prada SpA or Hermes International SCA, and not as an auto manufacturer. Those companies trade at over 20 times operating profit, more than twice the average valuation of carmakers.
"A luxury multiple is justified due to Ferrari's capital intensity, profit margins at scaled unit production, operating leverage and price inelasticity," said Adam Wyden, founder of ADW Capital Partners, who owns Fiat Chrysler shares.
Ferrari may be valued in a range of 12 to 14 times expected 2015 earnings before interest, taxes, depreciation and amortisation, one of the people said. Ferrari, which will be listed in New York under the ticker FRRI, posted adjusted Ebitda last year of €693 million after generating a margin of 25 per cent of sales. Profit rose 8.9 per cent in the first half of 2015. Representatives for Fiat Chrysler and Ferrari declined to comment.
Ferrari, which has made a point of restricting sales to preserve its models' high-end reputation, is set to push the boundaries of its exclusivity with plans to increase production of cars such as the €235,000 488 Spider convertible to 9000 cars in 2019 from about 7200 vehicles last year, according to a September 22 filing. The carmaker had previously set its limit at about 7000 cars a year.
"Ferrari is a legend" because of the value of the brand and its track record on profitability, said Lapo Elkann who, along with his brother, Fiat Chairman John Elkann, is part of the Agnelli family that controls the auto manufacturer. At Ferrari, "you don't sell a car, you sell a dream," he said in an interview in Milan.
UBS, Bank of America Corp.'s Merrill Lynch, Banco Santander, Mediobanca and JPMorgan Chase are advising on the IPO.
Bloomberg
