The teams working on the merger of Groupe PSA and Fiat Chrysler Automobiles (FCA) are “picking up the tempo” to finalize the merger, PSA CEO Carlos Tavares stated yesterday.
The merger was announced at the end of October and originally scheduled to be finalized in early 2021 at the latest, in order to create the world’s fourth-largest automaker and bringing under one roof brands like Peugeot, Citroën, Opel, Jeep, Alfa Romeo, Fiat and Maserati.
But the coronavirus pandemic has halted production at carmakers around the world as countries shut businesses and order people to stay at home to slow the spread of Covid-19.
The lockdowns have also hurt sales, and with the world entering a deep recession, the share prices of automakers have slumped.
That has called into question the financial terms of the merger, according to sources working on the transaction.
Tavares said the groups working on the merger at both automakers are speeding things up, according to comments made at a meeting last week of the committee coordinating the merger. “Working groups are maintaining or even accelerating the rhythm on the project during this crisis to achieve the closing,” said Tavares, and added, “The sooner the better.”
One reason for the push is that the two groups need the merger in view of the heavy investments that must be made in electric cars.
Current merger plans include each paying a dividend of 1.1 billion euros to their respective shareholders for 2019.
However, the French government has put pressure on companies, especially those that tap government crisis aid, to not distribute dividends and instead hold onto cash to continue operations. That subject will undoubtedly be discussed at PSA’s shareholders’ meeting set for June.
Meanwhile, analysts are wondering whether the terms of the planned merger of equals need to be adjusted. That is because while FCA was also expected to pay an extraordinary dividend of 5.5 billion euros, PSA was to distribute to its shareholders its 46-percent stake in car parts manufacturer Faurecia.
But Faurecia’s share price has now fallen, meaning the deal is even less advantageous to PSA shareholders.