Following reports from France that the merger between PSA Group and Fiat Chrysler Automobiles could be upended by the coronavirus, PSA announced that the media got this one all wrong. While the French automaker admitted that economic problems stemming from the outbreak are indeed concerning, it reiterated its commitment to safeguarding employment while adding that a merger makes even more sense now than before.
Still, there are valid reasons to question the current state of the merger agreement established in December via a memorandum of understanding. COVID-19 has sent global markets into a tailspin, with PSA and FCA seeing their share prices seesawing in the wrong direction over the last two weeks.
While the last few days has seen both companies regaining some of their lost value, neither are sitting pretty. Fiat Chrysler went from about $15 dollars per share in October, when the merger was announced, to roughly $7.50 today. Over the same period, PSA Group went from nearly $30 per share to just $13.72. Those in the know say this has not deterred negotiations; apparently, the businesses’ legal representation have continued seeking authorization from antitrust authorities so the merger can go through.
The Agence France-Presse news agency, however, reports that the financial impact of the pandemic will — at the very least — require the automakers to reassess the pact’s finer details, citing numerous insider sources asking to remain anonymous. Too much has changed over the past few months for there to be any alternative.
“Assumptions about valuation of the companies, revenues projections, sales for 2020 and beyond for both companies, all those mathematical assumptions that were made during the talks essentially have to be re-evaluated now,” explained Kelley Blue Book’s Karl Brauer.
From AFP:
The two groups planned a merger of equals, which involves paying a dividend of 1.1 billion euros to their respective shareholders for 2019.
FCA is also expected to pay an extraordinary dividend of 5.5 billion euros, while PSA must distribute to its shareholders its 46 percent stake in French equipment manufacturer Faurecia.
But Faurecia’s market capitalization has shrunk by at least a third since the merger was announced, which means the value of PSA’s stake lost nearly 1 billion euros as of Monday.
“We will have to rebalance things between shareholders if we still want to talk about a merger of equals,” said one of the financial sources.
And an industry expert, who asked not to be named, said, “I have always found that parity is very much to Fiat’s advantage.”
On Tuesday, French Economy Minister Bruno Le Maire warned all companies to exercise the maximum restraint possible on the payment of dividends. “It is a time when all the money has to be used to run businesses,” he said, adding that this would be doubly true of any businesses seeking government aid during the coronavirus pandemic.
“If PSA or FCA appeal to the state, how could they justify asking taxpayers for billions and distributing billions to their shareholders at the same time?” Gregori Volokhine of Meeschaert Financial Services told AFP.
For now, neither side is answering questions about how the merger might change. Considering how uncertain the next couple of months look, that’s not all that unreasonable, either. It’s doubtful the automakers are even in a position to effectively renegotiate. The industry could bounce back quickly after COVID-19 withdraws or stay in a prolonged state of decline if complications persist and factories take longer to resume operations. That’s a hell of a place to try and reopen the discussion.
FCA is silent on the matter, but PSA at least admits the status and schedule of the merger hasn’t changed. Expect that to be the narrative for at least the next few months.
[Image: PSA Group]
…Pretty sure the ad agency that came up with that lede photo should not be given the RAM, Jeep, and Dodge brand accounts.
Comment of the day.
How ’bout Subaru?
French perceive manliness a little differently than other people. That what makes France unique. What you see on photo is the image of French “James Bond”. Just imagine gun in his hand then you will understand.
…or put a fruit basket in his hand, and he is the Easter Bunny
You said what I was thinking, thx! Best laugh I’ll have today.
Let’s go fruity! Let’s go PSA!
With share prices as wacky as they are now, a merger re-think makes sense.
But the CV will serve as a convenient excuse for all kinds of things now:
-Missed deadline? “Coronavirus!”
-Can’t pay bills due to overspending? “Coronavirus!”
-Forgot to call that friend? “Coronavirus!”
-Fire the office dead wood? “Coronavirus!”
-Eating/drinking too much? “Coronavirus!”
Dart Hellcat based on the Pugeot 308 GTI?
The shown happy dance is the moment when you sell your Fiat……
-Nate
@-Nate: Clearly you have never owned a Fiat.
So true – you’d be crying at all the money lost after selling your fiat.
Where did the FIATs go? They’ve totally vanished in the D.C. area. Nada. Zero. Zip. Only Yugos disappeared faster….maybe. Until recently I’ve even seen a Daewoo Nubira driving around the village center a few miles away.
Fiat has been fighting a 50-year-old reputation that is no longer valid. Their cars are better than you want to believe, if you bother to ask anyone who has actually owned in in the last ten years.
Did you read what I wrote? It’s not a statement about how I feel, it’s a statement about their absence. How is it about “what I believe”? I know why Yugos disappeared; they were lousy cars. I DON’T know why the FIATs did.
I said I don’t see any driving around like I used to. That’s all. It’s such an anomaly for cars a few years old to vanish from the scene that I keep a lookout for them. Except…..they are aren’t on the scene. How can I “ask someone who owns one” when I can’t FIND someone who owns one? I can’t see something that isn’t there. How many ways can I put this?
Oops ~
I stepped on some toes, sorry .
I’ve driven and worked on Fiats and like all imports of those days they were mostly let down by their poor quality control, not by bad design .
Remember : I think old British cars are fine too and I’m sure they’re no better than Fiats…
-Nate
(who also liked his 1963 Renault)
Replying to me Vulpine?
If we are truthful to ourselves, everyone has made -at least once- a big mistake in life which ended costing him/her dearly.
When one finally realizes that things won’t improve in the future, and it is better to cut your loses now to carry on with the rest of your life, one does indeed feel that a heavy weight has been lifted from your shoulders.
That situation is called “experience”. It is how we learn from our mistakes.
Like the experience of having been a FIAT owner.
… an experience that was all fun and no pain.
But to comment on the actual post content:
Both FCA and PSA must be really, and I mean really desperate.
No one wants to sleep alone. It’s getting near last call and they’re looking better every beer.
@EGSE
“No one wants to sleep alone.”
Speak for yourself!
There is “Sleeping Together” and all the lovely things that such phrasing connotes, and then there is actual sleeping. As for actual sleeping, I will take alone 7 nights a week! …..da wife’s snoring is brutal, and she takes a full 2/3s of the bed! Thank goodness for the extra bedroom down the hall! Husbands…back my up on this…!
While my wife likes to complain about my snoring she does admit that when I’m gone she does have trouble sleeping.
We are lucky to have wives who love us deeply, yes. But gosh…I need to sleep!
Just wait until you’re older then remove your hearing aids and you’ll sleep like a baby .
I don’t sleep much but I rarely hear her either….
I have incredibly bad gas and she hates it but also doesn’t like it when I sleep elsewhere .
-Nate