Peugeot maker PSA and Fiat Chrysler have restructured their terms of the planned merger in order to conserve cash, with the merger also hinting at even more cost cutting given the effect of the COVID-19 pandemic on the automotive industry.
The two companies, which are set to merge together to form Stellantis, the world’s fourth-largest carmaker, stated through a joint statement late on Monday that Fiat Chrysler (FCA) would cut to €2.9 billion the cash portion of a €5.5 billion special dividend that the company’s shareholders will receive under the merger terms that they signed last year.
Along with this, France’s PSA, who apart from Peugeot also makes Citroen and Opel, will postpone the planned spinoff of its 46% stake in parts maker Faurecia until the merger is finalised and will extend it to all shareholders of the new group.
Faurecia has a market capitalisation of around €5.9 billion.
The two groups said that “Amendments preserve the balance of original combination agreement,” adding that the ownership of Stellantis would be split evenly between the current shareholders of PSA and FCA.
Reports on Monday said that these changes were aimed at reinforcing the balance sheet structure of the two companies after the automotive industry’s crisis due to the COVID-19 pandemic, and thus ensuring that the merger plan is concluded as soon as possible.
Previously, analysts had argued that with there being a very large cash payout to FCA shareholders, led by the controlling investor EXOR, which is the holding company of the Agnelli family in Italy, the new carmaker’s finances could be extremely weakened, with the automotive industry suffering throughout the pandemic.
FCA Chief Executive Mike Manley confirmed last week that the deal was on track to be completed, saying that both he and PSA CEO Carlos Tavarez were aware of the fact that both of the firms need to merge together in order to generate the strongest balance sheets possible, with this being needed for shareholders to get the amount that they expected.
The two companies also stated that the annual estimated synergies from their merger were now higher than the initial estimate of over €3.7 billion, with their new estimate being higher than €5 billion.
The two firms are set to complete the merger by the end of the first quarter of 2021.
Both of them scrapped dividend payments this year for the 2019 results, with each of the dividend payments being worth €1.1 billion.