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Fiat Chrysler, Peugeot maker PSA revise merger terms due to Covid-19 crisis

Peugeot maker PSA and Fiat Chrysler said they had restructured the terms of their planned merger to conserve cash, and also stepped up promised levels of cost cutting during the continuing pandemic

Topics
Fiat Chrysler | PSA Peugeot

Reuters  |  PARIS 

Photo: Reuters
Photo: Reuters

PARIS (Reuters) - Peugeot maker PSA and (FCA) said on Monday they had restructured the terms of their planned merger to conserve cash, and also stepped up the promised levels of cost cutting during the continuing pandemic.

The two companies, which are set to merge into Stellantis, the world's fourth-largest carmaker, said in a joint statement that FCA would cut to 2.9 billion euros ($3.4 billion) the cash portion of a 5.5 billion euro special dividend its shareholders will receive under the terms of the accord they signed last year.

France's PSA, whose brand portfolio also includes Citroen and Opel, in turn, will postpone after the merger's closing the planned spinoff of its 46% stake in parts maker Faurecia to all shareholders of the new group.

Faurecia's market capitalisation amounts to around 5.9 billion euros.

"Amendments preserve the balance of original combination agreement," the two groups said.

A source said on Monday that the aim of those changes was to reinforce the balance-sheet structure of both after the COVID-19 crisis and ensure that the merger plan is concluded as soon as possible.

Analysts had argued that such a large cash payout to FCA shareholders, led by controlling investor EXOR , the holding company of Italy's Agnelli family, could weaken the new carmaker's finances, as the auto industry was paying a high price for the coronavirus outbreak this year.

Confirming last week that the deal was on track, FCA Chief Executive Mike Manley said both he and PSA CEO Carlos Tavares were aware of the need for the two firms to get to the merger with the strongest balance sheet possible as well as for shareholders to get what they expected.

FCA and PSA said annual estimated synergies from their merger were now seen over 5 billion euros, compared with an initial estimate of over 3.7 billion euros.

The two carmakers confirmed that they expected to complete their tie-up process by the end of first quarter of next year.

Both carmakers earlier this year scrapped dividend payments on 2019 results, each worth 1.1 billion euros.

 

(Reporting by Gilles Guillaume in Paris and Giulio Piovaccari in Milan; Editing by Valentina Za and Peter Cooney)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Tue, September 15 2020. 09:03 IST
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