Car manufacturers FCA and PSA continue to count on their merger. However, the coronavirus pandemic forced both partners to change the fusion conditions.
French carmaker PSA and Italian-American Fiat Chrysler (FCA) have modified the terms of their planned merger. The changes aim to maintain more cash and reduce costs more during the ongoing coronavirus crisis. The companies announced this in today’s statement. The merged company will be called Stellantis and is set to be the fourth largest carmaker in the world after Volkswagen, Toyota and Renault-Nissan.
The FCA will reduce the cash part of the special dividend of 5.5 billion euros, which is to be received by the company’s shareholders under the terms of the agreement signed last year, to 2.9 billion euros (CZK 77.3 billion). PSA will then delay the planned distribution of its 46 percent stake in component manufacturer Faurecia to shareholders in the new group. Faurecia’s market capitalization now stands at 5.9 billion euros.
An informed source told Reuters that the aim of these changes is to strengthen the balance sheet structure of both companies after the coronavirus crisis and to ensure that the planned merger is completed as soon as possible.
Analysts warn that paying such high cash to FCA shareholders, led by controlling investor EXOR, the holding company of the Italian Agnelli family, could weaken the new carmaker’s finances as the automotive industry pays a high price for this year’s coronavirus epidemic.
FCA and PSA now expect annual savings from their merger of more than five billion euros instead of the original more than 3.7 billion euros. Both carmakers have also confirmed that they expect the entire merger process to be completed in the first quarter of next year.
The companies agreed on a merger worth USD 50 billion (CZK 1.2 trillion) in December 2019. The agreement brings together the brands of the French group Peugeot, Citroën, Opel and DS with the brands Fiat, Chrysler, Jeep, Dodge, Maserati, Alfa Romeo and Ram . The combined sales of the merged group should reach approximately 8.7 million cars and sales of almost 170 billion euros.