Fiat split in two set for volatile de­but on in­dus­trial spinoff

The Pak Banker - - Company& -

MI­LAN: Traders of Fiat SpA shares are brac­ing for a "crazy" day on Mon­day, when in­vestors as­sign their first value to the two stocks formed from the biggest re­or­ga­ni­za­tion in the car­maker's 111-year his­tory.

Fiat In­dus­trial SpA, the new com­pany whose main as­sets are truck and trac­tor mak­ers Iveco and CNH Global NV, may reach 9.40 eu­ros on the Mi­lan ex­change Jan. 3, ac­cord­ing to the av­er­age es­ti­mate of an­a­lysts com­piled by Bloomberg. Fiat may trade at 6.65 eu­ros, the es­ti­mates show, im­ply­ing the two stocks com­bined would be 7.1 per­cent more than the old Fiat's close yes­ter­day.

Both Fiat and Fiat In­dus­trial will be prone to swings on the first day be­cause the car­maker hasn't given an in­di­ca­tion of the stocks' val­u­a­tion and Fiat's profit fore­casts don't take into ac­count a stake in Chrysler Group LLC. The Ital­ian com­pany, with a mar­ket value of 18.4 bil­lion eu­ros ($24 bil­lion) as of yes­ter­day and whose first car was the 4 HP de­vel­oped in 1899, had gained 44 per­cent since an­nounc­ing the spinoff on April 21.

"I don't re­mem­ber an op­er­a­tion of this type in Mi­lan, es­pe­cially for a big cap like Fiat," said Alessandro Ca­puano, the head of the Ital­ian trad­ing desk for IG Mar­kets in Mi­lan, who has been track­ing eq­ui­ties the past six years. "It's not a clas­si­cal IPO. It could be a highly volatile trad­ing day."

In­vestors are get­ting one share of Fiat In­dus­trial for ev­ery Fiat share they hold. The Mi­lan ex­change doesn't plan to take or­ders in the pre-open­ing auc­tion phase Jan. 3, said Nun­zio Vis­ciano, head of list­ings at Borsa Ital­iana. The ex­change con­ducted a sim­u­la­tion with traders Dec. 16 to fa­cil­i­tate the de­but, which will co­in­cide with the first day of trad­ing on the bourse in 2011.

"It's go­ing to be a crazy day with shares danc­ing up and down and sev­eral sus­pen­sions," said Alessandro Frige­rio, a fund man­ager at RMJ Sgr in Mi­lan, who sold Fiat stock ear­lier this year. "We'll wait a few days be­fore de­cid­ing if we would buy."

Turin-based Fiat reached an al­most three-year high of 15.80 eu­ros on Dec. 27. Be­fore to­day, the stock had climbed 44 per­cent since April 21, the sec­ond-best per­for­mance on Italy's bench­mark In­dex, which lost 12 per­cent in the pe­riod. Exor SpA, which owns 30 per­cent of the car­maker, gained 76 per­cent. CNH, which trades in New York, added 49 per­cent. Fiat fell 16 cents, or 1.1 per­cent, to 14.83 eu­ros at 9:39 a.m. in Mi­lan. Exor lost 24 cent, or 1 per­cent, to 24.32 eu­ros.

Fiat Chief Ex­ec­u­tive Of­fi­cer Ser­gio Mar­chionne, who over­saw the ac­qui­si­tion of a 20 per­cent stake in Chrysler in June last year, pushed through the sep­a­ra­tion so he can fo­cus on car­mak­ing and fos­ter more auto al­liances. Fiat's re­main­ing as­sets af­ter the spinoff in­clude the Maserati and Fer­rari lux­ury brands.

To con­cen­trate on run­ning Fiat and Chrysler as both car­mak­ers' CEO, Mar­chionne, 58, gave Iveco's top job to Al­fredo Al­tavilla, 47, who will jointly run Fiat In­dus­trial with Harold Boy­anovsky, the 66-year-old CEO of CNH. Al­tavilla is a top can­di­date to run Fiat In­dus­trial, Marco Santino, a con­sul­tant at A.T. Kear­ney in Rome, said in Oc­to­ber. Of 32 an­a­lysts tracked by Bloomberg who have given rec­om­men­da­tions on Fiat in the past six months, 19 ad­vise buy­ing, nine say hold and four rec­om­mend sell­ing. " Fiat In­dus­trial will im­me­di­ately at­tract at­ten­tion due to a greater vis­i­bil­ity," Martino De Am­broggi, an Equita Sim an­a­lyst ranked by Bloomberg as the top Fiat an­a­lyst, wrote in a Dec. 22 note to clients. -Cour­tesy Bloomberg

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