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PSA, FCA officially together; no name selected?

by David Zatz on

PSA and FCA jointly released a statement that their boards have signed a binding agreement for a “50/50 merger.” Reflecting the even state of affairs, the statement was datelined from France first and then London, but listed the companies FCA first and then PSA.

The new company, whose name is still not known to the public, will be the fourth largest automaker by volume and third largest by revenue, with an operating profit margin of 6.6% (based on 2018 results). The two companies had a highly complementary selection of brands, with very little overlap. Geographically, PSA was very strong in Europe, while FCA was strong in North and South America.  Around 46% of revenue will come from Europe and 43% from North America.

tavares and manley

According to the release, over 2/3 of run rate volumes will be focused on just two platforms—around 3 million cars per year on the small platform, and 3 million on the compact/mid-size platform. This is expected to yield over a billion euros in savings per year; purchasing is also to yield over a billion euros in savings. All told, the companies expect to save €3.7 billion per year (40% in focusing on two major platforms, 40% in purchasing, and 20% in IT, logistics, and G&A). The companies do not foresee plant closures.

The board will, as previously reported, have eleven members, six of which will be independent; five will be nominated by FCA, and five by Groupe PSA. John Elkann, chair of FCA, will be chair of the combined company, while Carlos Tavares, CEO of PSA, will be CEO of the combined company for at least the next five years (and a member of the board). Mike Manley will continue in an executive role.

The parent company will be headquartered in the Netherlands, with stock exchange listings in Paris, Milan, and New York. The rules will forbid any shareholder from exercising over 30% of the votes. There will be no carryover of existing double voting rights, but new double voting rights will accrue after a three-year holding period. Exor, Bpifrance, and Dongfeng will not be able to buy new shares until seven years after the merger. The Peugeot family will be able to increase their shares up to 2.5% of the combined entity, and Bpifrance will be able to sell off its shares by 2.5%. Dongfeng is selling 30.7 million shares to Groupe PSA before the closing; the shares will be cancelled. That will leave Dongfeng with 4.5% of the new group.

Before closing, FCA will distribute to its shareholders a special dividend of €5.5 billion while Groupe PSA will distribute to its shareholders its 46% stake in Faurecia. FCA will split of Comau before the deal closes. Each company intends to distribute a €1.1 billion ordinary dividend in 2020 related to fiscal year 2019, subject to approval by each company’s Board of Directors and shareholders. At closing, Groupe PSA shareholders will receive 1.742 shares of the new combined company for each share of Groupe PSA, while FCA shareholders will have 1 share of the new combined company for each share of FCA.

Completion of the proposed combination is expected to take place in 12-15 months. Again, no name for the combined company has been floated yet, but you can read Allpar readers’ ideas for it.


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