Liquidity concerns prompted changes to the merger terms

Liquidity concerns prompted changes to the merger terms

The boards of Fiat-Chrysler (FCA) and Peugeot-Citroen (PSA) have agreed to amend terms of their proposed merger in a move designed to further conserve cash in the light of the ongoing impacts of the COVID-19 pandemic.

The two also confirmed the timetable to create the new merged company (to be called Stellantis) by the end of the first quarter of 2021.

In a statement, they said annual estimated run-rate synergies in the new company are also increased to in excess of EUR5bn.

The parties have agreed the amendments to merger terms in order to 'address the liquidity impact on the automotive industry of the COVID-19 pandemic while preserving the economic value and fundamental balance of the original agreement'.

Specifically, the special dividend to be distributed by FCA to its shareholders before closing is set at EUR2.9bn (previously EUR5.5bn), while Groupe PSA's 46% stake in Faurecia will be distributed to all Stellantis shareholders promptly after closing following approval by the Stellantis Board and shareholders.

As a result of these amendments, FCA's and Groupe PSA's respective shareholders will receive equal 23% shareholdings in Faurecia (capitalisation EUR5.867bn at market close, 14th September 2020), while their 50/50 ownership of Stellantis – a group that will now have  EUR2.6bn more  cash on its balance sheet – will remain unchanged.

Additionally, it has also been agreed that the Boards of both Groupe PSA and FCA will consider a potential distribution of EUR500m to the shareholders of each company before closing or, alternatively, a distribution of EUR1bn to be paid following the closing to all Stellantis shareholders. 

These decisions, the companies said, will be taken in light of the performance and outlook of both companies, market conditions and performance in the intervening period. Any such distributions will be made only if approved by the Boards of both companies.

The companies also said the boards of both FCA and Groupe PSA are 'more than ever convinced' of the logic and extraordinary value creating potential of their merger.

As a result of the 'significant progress made by the joint workstreams over the past months', the estimated annual run-rate synergies from the creation of Stellantis have been significantly increased to in excess of EUR5bn from the EUR3.7bn originally estimated.  The total estimated one-time implementation cost of achieving these synergies has also increased from EUR2.8bn to a figure of up to EUR4bn.

Commenting on the amended agreement, Carlos Tavares, Chairman of the Managing Board of Groupe PSA, said: "With this new decisive milestone, we are moving all together towards our goal in the best possible condition with even greater prospects for Stellantis. I would like to take this opportunity to warmly thank the teams who have built reciprocal relations of trust, including during the COVID-19 confinement. The human factor is at the heart of the dynamic of such a project, together with the support of our shareholders who have once again demonstrated their commitment to the creation of Stellantis."

Mike Manley, Chief Executive Officer of FCA, added: "I cannot commend highly enough the commitment of the teams working towards the launch of Stellantis and of all our people in overcoming the extraordinary challenges COVID-19 has presented.  Today's announcement is a further, strong signal of a common determination to ensure that Stellantis has all the resources it needs to apply its unique assets, its creative energies and many opportunities to the creation of superior value for all our stakeholders."