Impact of COVID-19... Changes in Merger Terms Between Fiat Chrysler and Peugeot

[Asia Economy Reporter Jeon Jin-young] Fiat Chrysler Automobiles (FCA), an Italy-US joint global automaker, and the French PSA Group have decided to change the merger terms to secure cash liquidity amid the impact of the novel coronavirus disease (COVID-19). The two companies are preparing to merge under the joint company named Stellantis.

[Image source=EPA Yonhap News]

According to major foreign media, on the night of the 14th (local time), the two companies agreed to amend the merger contract focusing on minimizing cash expenditures. Accordingly, FCA plans to reduce the special cash dividend for shareholders from the original 5.5 billion euros (approximately 7.7 trillion KRW) to 2.9 billion euros (approximately 4 trillion KRW).

PSA, which owns Citro?n and Opel, decided to postpone the corporate spin-off of its subsidiary parts manufacturer, Faurecia. Faurecia's market capitalization is 5.9 billion euros (approximately 8.27 trillion KRW).

However, the two companies stated that the foundation of the existing contract, including the 50-50 merger ratio, will remain unchanged.

This change in contract terms is based on the judgment that it is necessary to strengthen the financial structure so that both companies can maintain stable finances even after the merger, amid the prolonged industry crisis caused by a sharp decline in profits due to COVID-19.

Experts have expressed concerns that FCA's cash dividend could worsen the merged company's finances.

FCA and PSA agreed last October to merge under the condition of holding a 50-50 stake without factory closures. Both sides will establish a parent company in the Netherlands, investing half of the shares each.

Once the merger, scheduled for the first half of next year, is completed, it will become the world's fourth-largest automaker with an annual production capacity of 9 million units.

The two companies expect to generate synergy effects exceeding 5 billion euros (approximately 7 trillion KRW) annually after the merger.

This content was produced with the assistance of AI translation services.