Wheelspin

6 March 2018 By Liam Proud Follow @liamwardproud

The Italian auto group may hive off a non-core unit to earn a better valuation. Volkswagen and Daimler may do the same. The sums work on paper, but a lasting uplift hinges on investors reassessing the remaining businesses. M&A and operational improvements may have more impact.

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Fiat Chrysler Automobiles may hand its auto-parts business Magneti Marelli to shareholders via a Milan listing without raising money through share sales, Reuters reported on March 5 citing four sources familiar with the matter.

Under the deal – aimed at giving Magneti Marelli more flexibility, including to raise money in future – FCA investors will get shares in the parts maker in proportion to their existing FCA holding, the sources said.

Advisers initially looked at an initial public offering for the 99-year-old parts business to raise cash to cut FCA's debt. But the Agnelli family, FCA's main shareholder, was put off by low industry valuations and did not want its stake in Magneti Marelli to be diluted, three of the sources said.

The proposed spinoff may face some hurdles, as some investment funds holding FCA shares may not want to hold onto Magneti Marelli shares, one of the sources said.

FCA said on Feb. 28 that a possible separation would be reviewed by the board during the second quarter of 2018.

FCA’s Milan-listed shares were up 2.8 percent to 16.61 euros at 0910 GMT on March 6.

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The proposed spinoff may face some hurdles, as some investment funds holding FCA shares may not want to hold onto Magneti Marelli shares, one of the sources said.

FCA said on Feb. 28 that a possible separation would be reviewed by the board during the second quarter of 2018.

FCA’s Milan-listed shares were up 2.8 percent to 16.61 euros at 0910 GMT on March 6.

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