Time denies John Elkann: some terms of the agreement between FCA and PSA for the birth of Stellantis change. This is why the stock market, analysts and shareholders still applaud
"The terms of the agreement with PSA are written in stone and bound", argued John Elkann in the conference call on May 20 with analysts on the accounts of 2019. Then came Covid-19 and the economic crisis.
And so, on September 15, 2020, FCA and PSA changed some terms of the Combination Agreement 50/50 for the creation of Stellantis , the fourth largest automotive group in the world.
Celebrate FCA on the stock exchange, while analysts are positive. All the details.
What changes is the special dividend that will be distributed by FCA to its shareholders before closing. With the new terms, this is set at 2.9 billion euros, against the 5.5 billion previously set.
FCA AND PSA SHAREHOLDERS IN FAURECIA
Not only. Under the new terms, Groupe Psa's 46% stake in Faurecia will be distributed to all Stellantis shareholders immediately after the closing of the transaction. The shareholders of FCA and Groupe Psa will receive an equal stake in Faurecia equal to 23%, which has a capitalization of € 5.867 billion as of September 14, 2020.
THE COMMENT OF THE SUN 24 HOURS
The scheme of the operation, in fact, undergoes few changes, what changes – underlined Il Sole 24 Ore – are the pre-merger financial terms both for the shareholders of FCA, starting from Exor which owns 29%, and for the shareholders of the French company, whose shareholder register shows the Peugeot family at 13.6%, the French State (Bpifrance) and the Chinese partner Dongfeng at 12% each. The transalpine block therefore owns 37.6% of PSA.
AN OPTIONAL DISTRIBUTION
FCA and PSA will also assess, based on the performance of the companies, a potential distribution "of € 500 million to the shareholders of each company before closing or, alternatively, a distribution of € 1 billion to be paid after closing to all shareholders di Stellantis ”, reads the note from FCA.
WHY FCA AND PSA CHANGE THE TERMS OF THE AGREEMENT
The Covid crisis pushes FCA and PSA to deny what John Elkann said. The new terms, in fact, aim "to address the liquidity impact that the COVID-19 pandemic has on the automotive industry, while preserving economic value".
THE CALCULATIONS OF THE SUN 24 HOURS
“A check for 2.6 billion. This is the "price" paid by the shareholders of FCA and PSA in light of the review of the great merger agreement – Il Sole 24 Ore calculated today – A cost that, in fact, the current shareholders of FCA and PSA pay to the future group of which they will become partners, Stellantis, fourth in the world in the car. The colossus that will be born from the merger will in fact be able to count on a cash reserve of 2.6 billion more ”.
FCA FLIES IN THE STOCK EXCHANGE
The news of the modification of the agreements was positively received by the market. Yesterday, on the stock market, FCA shares jumped 11.7% to 11.14 euros on September 15. The agreement, in fact, is considered more favorable for the shareholders of the Italian American group.
It should also be emphasized that the estimated annual synergies, when fully operational, of Stellantis have increased to “over € 5 billion, compared to the originally estimated € 3.7 billion. The total estimated one-off implementation costs to achieve these synergies also increased from € 2.8 billion to a maximum of € 4 billion ”, explains the Italian group.
EQUITA: GREATER SYNERGIES OFFSET NEW TERMS
Precisely this point struck Equita's analysts, who underline that “the major industrial synergies more than compensate for any revision of terms”. The future Stellantis is “one of the few aggregation stories with a strong industrial value at European level, in a scenario that is progressively improving compared to the lows of the second quarter”, analysts say .
UBS: NEW TERMS ARE REBALANCING
They agree in UBS, where it is argued that the revision of the terms is "a small rebalancing" that should not change the opinion of investors who consider the agreement more favorable for FCA. "The terms of the agreement are largely unchanged for PSA shareholders, the potential of synergies should attract more and generate an attractive upside in the short term," they say at UBS.
AKROS AND FIDENTIIS ALSO PROMOTE INTESA
Also promoting the terms of the new agreement are Banca Akros, which looks to the fact that there is no longer any uncertainty about the agreement, and Fidentiis, who considers the fears of the market over a revision penalizing for FCA to be overcome.
THE SATISFACTION OF BPIFRANCE
Bpifrance, shareholder with 12.2% of Psa and subsidiary of the French CDP, is also celebrating. Bpifrance "fully agrees with the steps taken to strengthen Stellantis' capital structure," says the French sovereign wealth fund, according to Bloomberg. "The confirmation and reassessment of synergies – affirms Bpifrance – will allow the future group to face an extraordinarily challenging market context and to manage the turbulence that the automation industry has to deal with in the long term".
THE ANALYSIS OF THE SUN 24 HOURS
Ultimately, it was decided to cut the special dividend that will be distributed by FCA to its shareholders before closing: compared to the 5.5 billion initially budgeted, the cash coupon drops to 2.9 billion, Il Sole 24 Ore wrote: " The fate of the 46% held by Psa in the components company Faurecia also changes, in the old scheme destined for the spin off before the merger and now “included” in the merger. That stake, held by Psa and intended to be distributed to French shareholders, will now be passed on to all Stellantis shareholders immediately after the closing of the transaction. The mutual coupon cut, both for FCA and PSA shareholders, will in fact generate additional liquidity for Stellantis of 2.6 billion ".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/come-cambia-laccordo-tra-fca-e-psa/ on Wed, 16 Sep 2020 05:43:12 +0000.