FCA, PSA amend merger agreement due to COVID-19
Fiat Chrysler Automobiles NV shareholders will see a smaller-than-expected dividend ahead of the Italian American automaker's merger with French rival Groupe PSA because the COVID-19 pandemic has placed pressure on financial liquidity.
The boards of both companies have agreed to amend their combination agreement reached last December in order to preserve the 50-50 balance and the economic value of the combined entity, which will be known as Stellantis, FCA and PSA said Monday in a joint statement. The deal still is expected to close during the first quarter of 2021.
Fiat Chrysler will distribute a $3.4 billion dividend to shareholders ahead of the merger instead of the previously agreed $6.5 billion. PSA, however, will delay the distribution of its 46% stake in auto supplier Faurecia until after the deal closes. Shareholders of both companies will receive 23% distributions in Faurecia.
Based on market conditions and performance, the companies said the boards also may consider a distribution of $593 million to each company's stockholders prior to the merger or a $1.2 billion allocation afterward.
The measures seek to "ensure that Stellantis has all the resources it needs to apply its unique assets, its creative energies and many opportunities to the creation of superior value for all our stakeholders," FCA CEO Mike Manley said in a statement.
The automakers also increased their projected annual run-rate cost savings for the combination to $5.9 billion, up from the original estimates of $4.4 billion after "significant progress" made by a joint team working on the deal. The company repeatedly has insisted that there will be no plant closures as a result of the merger.
Fiat Chrysler shares were increasing 2.4% in post-market trading Monday after the announcement.