Ferrari Stomps On The Accelerator On Its IPO

New Business Netherlands NV (NYSE: RACE) (better known as Ferrari) expects to raise $858 million in its upcoming IPO. Based in Maranello, Italy, New Business Netherlands NV produces luxury performance sports cars, including Ferraris.

New Business Netherlands NV will offer 17.17 million shares at an expected price range of $48 to $52. If the underwriters price the IPO at the midpoint of that range, RACE will have a market capitalization of $9.4 billion.

RACE filed for the IPO on July 23, 2015.

Lead Underwriters: BofA Merrill Lynch and UBS Investment Bank

Underwriters: Allen & Co., Banco Santander, BNP Paribas Securities, J.P. Morgan Securities, Mediobanca Banca di Credito Finanziario, and Santander Securities

Business Summary: Maker of Ferrari Luxury High-performance Sports Cars

New Business Netherlands NV designs, engineers, produces and markets luxury high-performance sports cars worldwide. The company intends to license its Ferrari brand to a variety of manufacturers and retailers of luxury lifestyle goods. The design and manufacturing of these automobiles takes place in Maranello, Italy, and they are sold in over 60 markets worldwide by 182 authorized dealers, who operate a total of 204 points of sale.

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New Business Netherlands currently sells nine models, including seven sports cars and two GT cars. These models are the 458 Italia, 488 GTB, 458 Spider, 488 Spider, F12berlinetta, 458 Speciale, 458 Speciale A, California T and FF. Recently, the company replaced two 458 models with 488 series models, and it expects to fully replace the 458 line by the end of 2015. New Business Netherlands also produces a limited edition super car, LaFerrari, and a very limited edition series, Fuoriserie.

In 2014, the company shipped 7,255 automobiles and realized net revenues €2,762 million, net profit of €265 million, adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) of €693 million and earnings before interest and taxes (EBIT) of €389 million.

No net proceeds of the IPO will go to the company; rather selling shareholders will receive the net funds. The Ferrari family owns 10 percent, and Fiat Chrysler owns 80 percent of the shares. After the IPO, Fiat Chrysler shareholders will receive the remaining Ferrari shares in order to split the manufacturer from its parent company.

New Business Netherlands NV was incorporated in 2013, is headquartered in Maranello, Italy, and operates as a subsidiary of Fiat Chrysler Automobiles NV.

Executive Management Highlights

CEO Amedeo Felisa has been in his position since 2008. He joined the company in 1990, and has held successively higher positions during his tenure. His previous experience includes executive positions at Alfa Romeo and Maserati. Mr. Felisa has been a Director of Ferrari S.P.A since October 2006. He graduated in Mechanical Engineering from Milan Politecnico.

CFO Alessandro Gili has been in his position since February 2015. He has held various executive positions at Fiat Chrysler and Fiat Auto since 2002, including Group Chief Accounting Officer and Principal Accounting Officer, Vice President of World Class Finance and Processes, Corporate Controller and Chief Accounting Officer for FCA US, Head of Accounting and World Class Finance, Fiat Group Automobiles Sector. Mr. Gili holds a Degree in Economics, Finance and Administration from Turin University and is a Certified Public Accountant and Certified Public Auditor in Italy.

Potential Competition: Lamborghini, Porsche, Audi and Mercedes

New Business Netherlands faces competition from several luxury sports car manufacturers such as Lamborghini, Porsche, Audi, Aston Martin, Rolls Royce and Mercedes.

Strong Top & Bottom Lines

New Business Netherlands provided the following figures from its financial documents for the six months, ended June 30:

Financial Position:

Conclusion: Light Switches To Green

We were previously negative on this IPO (despite our love of fast cars), given the volatile market and Ferrari's low volume strategy.

Now, however, the deal appears to be shaping up well. We hear it is already oversubscribed, likely due to project growth (despite a luxurious price tag).

Being a luxury brand, RACE stands out from the other two deals to price this week, Multipackaging Solutions (MPSK) and Dimension Therapeutics (Pending:DMTX).

RACE's balance sheet is also relatively clean, compared with highly leveraged firms Albertson's (NYSE:ABS) (postponed) and First Data (NYSE:FDC).

We now suggest buying in.