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Magneti Marelli Spinoff?

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Bloomberg reports Fiat Chrysler Automobiles NV has fielded interest in some of its Magneti Marelli businesses as the Italian-American carmaker prepares for a potential spinoff of the auto-parts unit by early next year, according to people familiar with the matter.

Bain Capital has sought to buy businesses including the lighting division, and U.S. rival Tenneco Inc. has shown interest in some or all of Marelli’s assets, said the people, who asked not to be named as talks are private. Brembo SpA, which supplies brakes for Ferrari NV’s Formula 1 race cars, has discussed buying some Marelli assets, working with a group of Italian investors, they said.

A Brembo representative said the company doesn’t currently have any plans regarding Marelli. Bain, the private equity group, and Tenneco, based in Lake Forest, Illinois, declined to comment, as did Fiat Chrysler. 

While Fiat Chrysler still favors a full distribution of Marelli stock to its investors at the beginning of next year, it could eventually be open to selling some product lines before the separation, the people said. Chief Executive Officer Sergio Marchionne, who has so far rebuffed the suitors, doesn’t want to sell businesses that make key components for the automaker to private-equity investors, but a sale to an industrial buyer could potentially make sense, the people said.

Spinoff Plan

Magneti Marelli may be valued at about 5 billion euros ($6.1 billion) including debt, the people said. Fiat Chrysler said last year that it was considering a spinoff of the unit, as part of Marchionne’s plan to unlock value and better position the company for the changes churning through the industry. The 65-year-old CEO had more recently targeted last month for the board to review terms for distributing the stock.

Fiat Chrysler’s board will consider a potential spinoff in the second quarter, according to a statement late Wednesday. “In the meantime, management will continue its evaluation of potential transaction structures to maximize value,” it said.

Like other car-part makers, Marelli has a mix of low-margin and premium product lines whose differences will only widen with the switch to automated and electric cars. The unit, founded in 1919, manufactures automotive lighting systems, powertrain components and engine-control units, along with electronic systems, suspension systems, shock absorbers and other components and modules. It had sales of about 7.9 billion euros in 2016, and employs about 43,000 people.

A spinoff would be in keeping with a global trend by parts suppliers to become more specialized amid the move to electric and self-driving cars. Competing U.S. parts supplier Delphi divided last year into vehicle-propulsion systems producer Delphi Technologies Plc and Aptiv Plc, which focuses on connected and autonomous cars, while German tire and powertrain maker Continental AG said in January that it’s mulling a possible revamp.

Unit Independence

Marchionne has already turned Fiat Chrysler’s CNH Industrial NV unit, which makes trucks and construction equipment, and the Ferrari supercar division into separately traded companies as he seeks to focus on automaking.

Fiat said it will discuss Marelli’s separation as part of its review of the group’s five-year plan to 2022, the last one under Marchionne’s leadership. The executive, who plans to step down next year, will outline on June 1 his vision for the future of the carmaker. During his tenure, he increased the former conglomerate’s value by more than 10 times to about $80 billion helped by the spinoff of Ferrari and CNH.

Adapt or Die Is Marchionne’s Stark Farewell Message to Carmakers

In an interview in January, Marchionne predicted that carmakers will have less than a decade to reinvent themselves to survive in the world of new technologies. Premium brands will manage to hold onto their cachet, while more run-of-the-mill manufacturers will confront disruptors including electric-car maker Tesla Inc. or the Waymo robo-vehicle division of Google parent Alphabet Inc., he said.

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