| 12:40 PM EST

FCA-PSA Tweak Merger Terms

Revised deal will give the new Stellantis another $3.4 billion in cash.
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The auto industry’s largest merger ever is still on track. But the terms have changed to cope with the impact of the COVID-19 pandemic.

PSA Group and Fiat Chrysler Automobiles still expect to finalize a $47 billion deal to form a new holding company called Stellantis before April 2021.

More Cash

The two major tweaks they have in mind will give Stellantis an additional €2.9 billion ($3.4 billion) in cash. Both partners have previously dropped plans to pay dividends on 2019 results worth €1.1 billion to each group of shareholders.

Now, FCA also will nearly halve the special merger dividend it initially proposed to pay its equity holders to €2.9 billion from the original €5.5 billion.

At the same time, PSA will retain rather than spin off its 46% stake in components maker Faurecia to PSA shareholders. Instead, the holding will be distributed to Stellantis stakeholders, giving each group a 23% holding in the supplier. Faurecia has a current market value of €5.9 billion ($7 billion).

Extra Payout?

The two carmakers say their board also are considering a revised special distribution to their shareholders. The scheme would either pay each of the two groups €500 million ahead of the merger or €1 billion to the combine shareholder pool after deal is completed.

The partners say a decision whether to implement the payout will hinge upon an assessment of company and market outlooks over the next six months.

Analysts are happy about the additional liquidity created by the revised deal. They’re also heartened by a new estimate about synergies.

More Synergies

The companies now estimate annual cost savings will surpass €5 billion ($5.9 billion), up from the €3.7 billion estimated when they confirmed the merger plan in mid-December. The partners said at the time that the merger would not involve any plant closures.

The companies did not explain how they arrived at the larger savings goal. But they did say it will cost more—€4 billion instead of €2.8 billion—to achieve those synergies.

Bullish analysts say this month’s round of adjustments sweep away worries about how the pandemic might have shaken the assumptions about the value of a merger. It’s all systems go.

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