According to a recent report emerged on the internet, FCA and PSA have come on terms over a merger and this will effectively make the new conglomerate the fourth largest in the world. The agreement was said to have been given the nod by FCA’s Chairman John Elkann and is expected to close during the first quarter of the next calendar year.
Speculations surrounding the Fiat Chrysler Automobiles and Groupe PSA’s merger have been there for several months and the report surfaced on Reuters indicates a done deal. It must be noted that FCA was heavily criticised in its home country of Italy over a six billion USD special dividend part of the deal with PSA, following its local operations said it was convening over a 6.3 billion euro loan backed by the state.
It was to cope up with the latest healthy crisis that choked the life out of thousands of Italians over the last four months. The possibility of such payment to shareholders was not received well among the general public and the ruling authorities. However, FCA’s chairman said in conference call after the annual shareholder meeting of Exor that the terms of the agreement had not been revised.
He further explained that it was a clear cash and equity agreement to attain a 50:50 merger agreement between the shareholders of both the companies who are “committed to get parity in the merger deal.” Elkann is also the chairman and CEO of Exor, the Agnelli family holding company controlling FCA. The dividend to be paid by FCA in the Netherlands is a core part of the overall value of the merger reportedly.
The loan was said by Elkann to be designed to help the automotive industry in Italy, a major part of the country’s economy. The report further noted that Rome might look into extending a ban on dividend payments accessing state guarantee from the end of this year to another one year period following the loan guarantee concession.
This could put FCA’s plans in trouble as the special dividend payment as mentioned above is due just ahead of the merger closure with PSA. The dividend was agreed before the social and economic conditions in Italy were thrown into disarray and it could be reviewed considering the dire state of the existing stock market to preserve cash. Standing in contrary, the merger reasons are stronger than ever and the preparatory work for the tie-up is on time and as planned according to Elkann.
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