The Fiat Group and Italian banking concern Mediobanca are expected to sell the minority stakes the two companies hold in each other as Fiat edges ever closer to repurchasing the Ferrari shares they sold to Mediobanca in 2002, reports Italian daily newspaper La Repubblica.

Fiat has a call option in place to buy back the entire 34 pct of its Ferrari sportscar division that it sold to Mediobanca, at the original purchase price of 775 million euros plus an undisclosed sum interest. However the option expires at the end of this month, meaning that Fiat CEO Sergio Marchionne has just a few weeks remaining to negotiate a deal.

Marchionne sees Fiat's Ferrari unit as being a strategic asset, for its profitability, future growth and earnings potential and the Research & Development opportunities it can  offer to Fiat, and so an important part of the Group's future. As such he is anxious not to allow the 34 pct stake that Mediobanca holds being sold to other investors. However at the same time he also has to balance the financial market's concerns about Fiat spending a large sum of money when it is just dragging itself out of the mire. Fiat has recently turned around the dire position of its automotive division to become one of the best performing carmakers this year and with credit agencies now starting to see its stock in a different light it doesn't want to damage this vital shift in perception.
 

Fiat is now reportedly ready to sell its 1.8 pct stake in Mediobanca, claimed La Repubblica, to help it raise funds to buy back the Ferrari stake. The stake is reckoned to be worth around 230 million euros and the proceeds of the sale would help lower the amount of cash Fiat has to pay for the Ferrari shares.

The newspaper adds though that another problem comes with an agreement that Fiat has in place with Mediobanca to not divest itself of the stake until next year. At the same time Mediobanca is reportedly ready to offload the 1.9 pct stake it holds in the Fiat Group, an investment that the bank downgraded from being strategic during a wide ranging review it held last year, which also saw a decision made to offload the Ferrari stake as soon as was possible. Analysts believe that as part of the on-going negotiations Marchionne will help Mediobanca find a solution to its minority Fiat stake, possibly in the form of a buy-back of the shares.

Fiat originally sold 34 pct of its Ferrari arm to Mediobanca in 2002, keeping hold of a controlling majority, but is now widely expected to buy-back only 29 pct, and not repurchase the 5 pct that Mediobanca subsequently sold to the Mubadala Development Company, a Government of Abu Dhabi-backed investment corporation for 114 million euros, last year, allowing the Arab firm to become a long-term minority investor in the Maranello sportscar maker.