Fiat Chrysler to list Ferrari stake, issue $2.5 billion convertible bond

MILAN (Reuters) - FIAT (F.IT)Chrysler Automobiles (FCA) plans to list a 10 percent stake in luxury brand Ferrari and issue $2.5 billion in convertible bonds to help fund the parent company's turnaround plan.

The newly-created FCA, which listed shares in New York earlier this month, wants to invest 48 billion euros ($61 billion) over the next five years in a bid to catch industry leaders such as Volkswagen and Toyota, and some analysts have questioned whether it can afford that much given tough markets.

"They seem to have sorted out their capital worries in one go," Roberto Lottici, a Milan-based fund manager for Ifigest, said. He added that a spin-off of the famed Ferrari sports car brand should help to boost FCA's valuation.

Milan-listed shares in FCA , the world's seventh-largest carmaker, jumped more than 18 percent to trade at 9.03 euros on Wednesday, their highest level since April 23 and outperforming a 0.2 rise in Milan's blue-chip index .

"It looks to me like they've packaged the Ferrari deal as a pill to help sell the convertible (bonds) after results that were far from overwhelming," Lottici added.

Earlier on Wednesday, FCA reported a 7 percent rise in third-quarter operating profit to 926 million euros ($1.18 billion). This included one-off expenses of 36 million euros.

Revenues were up 14 percent to 23.6 billion euros.

Ferrari could have an equity value of between 5 billion euros and 5.8 billion euros, according to brokers.

FCA said it would list the 10 percent stake in the United States and possibly on a European exchange, hoping to complete the spin-off next year. Its remaining 80 percent stake would be distributed among FCA shareholders, who include Fiat's founding Agnelli family.

Ten percent of Ferrari is held by Piero Ferrari, the group's vice chairman and son of the carmaker's founder Enzo Ferrari.

"As we move forward to secure the 2014-2018 business plan and work toward maximizing the value of our businesses to our shareholders, it is proper that we pursue separate paths for FCA and Ferrari," FCA Chief Executive Sergio Marchionne, who took over as Ferrari chairman this month, said in a statement.

FCA also said it would issue so-called mandatory convertible bonds, which will have to be converted into FCA shares on maturity. Investors in the bonds will also get subscription rights for the Ferrari shares being listed.

After ruling out a separate Ferrari listing for years, Marchionne had hinted at a possible change of heart in a Reuters interview this month, when he described the sports car maker as a "phenomenal carrot" for prospective U.S. investors.

FCA said on Wednesday it would also sell up to 100 million of its shares, including treasury shares and stock that will be issued to offset a buyback from investors who opposed the recent merger into Fiat Chrysler Automobiles.

The company also plans to repay ahead of maturity Chrysler bonds due in 2019 and 2021.

Analysts have long said FCA, with net industrial debt of 11.4 billion euros at the end of September, needed to raise capital to strengthen its balance sheet, especially as it is battling losses in Europe and weakening Latin American markets.

(This story corrects the ninth paragraph to show that 80 percent of Ferrari shares will be distributed among FCA shareholders, clarifies that 10 percent of Ferrari is held by Piero Ferrari)

(Additional reporting by Stephen Jewkes and Stefano Rebaudo; Editing by Mark Potter)