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Financial Review May Affect Details of FCA-PSA Merger

COVID-19 impact assessment due by year-end
#Fiat #Chrysler #FiatChryslerAutomobiles

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The impact of the COVID-19 pandemic may push PSA and Fiat Chrysler Automobiles to rework some of the terms of their merger plan.

The companies say they are still on track to finalize the $47 billion deal by early 2021. But PSA CEO Carlos Tavares notes that both companies also are focused in the meantime on the more immediate goal of repairing their balance sheets.

Reality Check

Tavares tells Bloomberg Television the companies hope that a market rebound by the end of this year will enable them to assess their cash positions so their boards can decide whether to modify initial terms of the deal.

In the meantime, Tavares says, “We are in execution mode” to proceed with the merger. The companies revealed two weeks ago that the resulting holding company will be named Stellantis.

New Terms?

When the binding agreement was finalized in December, each company intended to distribute €1.1 billion in dividends in 2020. That idea has been scrapped as a cash-conserving move.

FCA also originally planned to give its shareholders a €5.5 billion ($6.5 billion) special distribution linked to the merger. That seems very unlikely too, especially after FCA secured a €6.3 billion credit line backed by the Italian government to help it navigate the COVID-19 crisis.

In contrast, PSA has shunned government aid to “remain control of our destiny,” Tavares says. Yesterday the company reported that it had eked out a €376 million ($443 million) net profit in the first half of 2020 in spite of a 36% drop in automotive-related revenue.

“We are determined,” Adds Tavares, “to achieve solid rebound in the second half of the year.”

What’s Next?

Cash flow isn’t the only issue that may affect terms of the merger. Last week the European Commission’s antitrust officials confirmed a delay in their probe into the overlapping commercial van businesses of each company.

That investigation now appears to be headed for conclusion at about year-end, just about when FCA and PSA hope to have a sharper bead on their financials.

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