SHOT VIEW: FCA-PSA new merger terms

September 21, 2020

EUR5.5 billion dividend for FCA shareholders reduced to EUR2.9 billion and 46% of Faurecia's shares to Stellantis shareholders.

Given the impact that the crisis due to Covid19 has had on the liquidity of the two companies, FCA and Peugeot have revised the terms of the merger. The expected EUR5.5 billion dividend for FCA shareholders was reduced to EUR2.9 billion. At the same time, 46% of Faurecia's shares, initially intended for Peugeot shareholders, will be distributed to Stellantis shareholders. Shareholders of the two companies will receive an equal 23% stake in Faurecia, while their 50/50 ownership of Stellantis will remain unchanged. This will allow FCA shareholders to receive the equivalent of approximately EUR1.3 billion, and thus offset the lower dividend. Finally, the Boards of Directors of the two companies will consider the possibility of distributing EUR500 million before the merger or EUR1 billion after the completion of the transaction. These decisions will be made in the light of FCA and Peugeot's prospects, the performance recorded and the market conditions. FCA and Peugeot also reported that estimated annual synergies since the company's creation have increased from EUR3.7 billion to over EUR5 billion. The estimated cost of achieving synergies has also increased from EUR2.8 billion to EUR4 billion. The other terms of the agreement have been confirmed and the merger is expected by the end of the 2021 first quarter.

For FCA shareholders the remuneration will be EUR1.3 billion lower, while for Peugeot shareholders the loss will be EUR1.9 billion. In a period of strong economic stress, the revision of the agreement represents positive news. It improves the financial position of the new car company and at the same time removes uncertainty about the merger continuation. Although we are aware of the volatility that has been characterizing the markets in the last period, analyzing FCA from a fundamental point of view, we believe that the company has great growth potential for the next few years, which is why it is a BUY for us.