PSA Group Seen As The Buyer In Merger Of Equals With Fiat Chrysler

It’s been a day since Fiat Chrysler Automobiles and PSA Group announced their 50-50 merger, leaving enough time for markets to react and figure out who the real buyer is.

FCA’s shares jumped in value by 10 percent following the official announcement, while PSA’s shares dropped by about the same amount, which is the typical buyer’s hit according to a Bloomberg report.

The two car makers went out of their way to make this merger as equal as possible, and that included paying dividends, shedding assets and distributing board seats. FCA shareholders will receive a premium of almost 5 billion euros ($5.6 billion), based on share prices before reports of the negotiations and both sides shed assets before combining their remaining equity.

Read: FCA And PSA Agree To Merge, Create The World’s Fourth Largest OEM

After adjusting the differences in market values and the 5.5 billion-euro dividend paid out to FCA’s shareholders, “achieving a 50/50 shareholding suggests PSA is paying a 32% premium to assume control of FCA,” Jefferies analyst Philippe Houchois said. “PSA shareholders are assuming more market risk.”

As of Tuesday, the PSA Group had a market value of 22.6 billion euros. Prior to merging with FCA, the French automaker will give out its 3 billion-euro stake in parts maker Faurecia to its shareholders, leaving around 19.6 billion euros to be contributed to the new company.

FCA’s shareholders will contribute at least 5 billion euros less; The Italian-American car maker had a market value of 20 billion euros as of Tuesday, but before the merge it’ll have to hand out around 5.75 billion euros that includes both the aforementioned dividend and its robotics arm Comau to its shareholders.

Out of the 5.75 billion euros before the deal closes, FCA’s Agnelli family will gain almost $1 billion in value through their holding company Exor, Fiat Chrysler’s biggest shareholder.

FCA’s Chairman and Agnelli family scion John Elkann will still retain a lot of power, as he’ll be chairman of the new merged company and Exor will be its largest shareholder with around a 14 percent stake.

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  • Six_Tymes

    Good things will come, for sure.

    • Alduin

      Not sure if good or bad news. They did turn Opel into a profitable brand.

  • EyalN

    coming soon:
    peugeot 208 / Citroen C3 / Open Corsa / Fiar Punto / Alfa Mito.
    and a Jeep based on peugeot 2008

    • Alduin

      2008? It’s almost 2020!

  • Craig

    Then again PSA isn’t worth as much. [Based on what I’ve been reading online] So they would have to pay more to become equals.

  • joker1372

    Un miliardo alla famiglia agnelli!!?!?!!!?!!

    • RobPul

      Personalmente credo fosse il piano degli Agnelli con Marchionne dall’inizio, creare una FCA forte nelle Americhe (togliendo investimenti ai marchi e mercato europei, che sono stati praticamente abbandonati) come complemento ad un gruppo forte in Europa, con la prospettiva di guadagnare da una vendita o fusione. A loro che il baricentro dell’industria automobilistica italiana si sposti negli Stati Uniti e Francia importa poco, come azionisti ci hanno largamente guadagnato.

  • Big Black Duck

    Marchionne will rest in peace now

  • MarkoS

    Well Jeep and Ram are white hot, PSA has more to gain, tad costs a tad more. This will be interesting.

    • Alduin

      Jeeps are unreliable. The 9 speed automatic is a POS.

  • Alduin

    What does this mean for the US market? Please kill off Fiat here.

  • RobPul

    While I don’t think that’s the case (board will be 5 PSA, 5 FCA and 1 for the CEO who in 5 years might change, while chair and largest shareholder will be Agnelli’s side), this continues in a path started with Marchionne under the Agnelli’s direction.

    They did not care about moving the centre of gravity of the Italian automotive industry from Italy to the US and, now, US and France. They created a US-focused FCA as perfect complement to a Europe-focused group, with a merger or sale in mind. As shareholders, the Agnelli family largely gained from it.

  • Сафиуллинь-Мухамед Рамазанов

    RIP SERGIO MARCHIONNE !

    • JqC

      It’s what he would have wanted. He is well pleased, trust me.

  • kachuks

    Fiat was the buyer last time. Chrysler, RAM, Jeep ended up paying the bills and generating profits while the euro side struggled.

  • botornot387

    I am actually 100% okay with this. FCA has been a weak brand in terms of what they have done, and the only brands that are doing well under the umbrella are RAM and the Jeep Wrangler. PSA group has proven that are a force and have a clear vision in mind, something that has lacked under FCA leadership. If anyone can assume control of FCA and steer the ship, this is the right group to do so. And cause cost synergies make or break brands, inevitably FCA would have needed this.

  • Alexandro Pietro

    Hey PSA ,the only easy-sale mark in this group is JEEP,the rest is out – fashioned

  • JqC

    I think this is a good decision on their part, but I fear that it may be a little too late for them. The problem is electrification. That is changing the industry faster than some of the largest and best capitalized automakers in the world are able to deal with. PSA/FCA have serious challenges. They will need to get a series of EC-specific platforms ready immediately that can be shared across their models. They must move, and fast.

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