After many rumors, the official announcement arrives: FCA and PSA (Peugeot and Citroen) they reached an agreement for the merger. The communication arrived on Wednesday morning, before the opening of the markets. The transaction will create the second largest European automotive group and the fourth globally after Volkswagen, Renault-Nissan and Toyota. The name is yet to be decided, however the closing is expected within 12-15 months.
HEADQUARTERS IN THE NETHERLANDS, 3 BIG QUOTATIONS AND NUMBERS
The new group will be based in the Netherlands and will be listed on the Milan, Paris and New York stock exchanges. Production capacity will reach nearly nine million vehicles a year. As for the balance sheet, revenues of almost 170 billion euros are expected, a recurring operating profit of over 11 billion euros and an operating margin of 6,6%.
SAVINGS OF 3,7 BILLION FROM SYNERGIES
When fully operational, the expected savings amount to 3,7 billion euros, of which 40% produced by synergies at the level of technologies, products and platforms and another 40% generated by savings in terms of purchases. The remaining 20% will come from marketing, administration, general expenses.
NO CLOSURE OF FACILITIES
Generating these synergies will impose a one-off cost of €2,8 billion, but no plants will be closed. On the contrary: FCA and PSA guarantee the continuation of the industrial plans already underway.
THE STRUCTURE OF THE BOD
The Board will be made up of 11 members: five will be FCA-Exor, with John Elkann who will also be president of the new group, and five will be French, including the vice president and the "senior non-executive director". Carlos Tavares will be the CEO (as well as a member of the board) for an initial five-year term. In addition, the Board will include two members representing FCA and PSA workers.
SHAREHOLDING
As regards the shareholding structure, the Chinese of Dongfeng will drop from the current 12,2% in Psa to 4,5% of the new group, with the authorization for the Peugeot family to take over part of it. PSA will then buy 30,7 million of the shares held by Dongfeng, before the closing of the operation, to cancel them. In this way, the shares of the French family and the state would together reach around 14%, in line with that of Exor.
VOTING RIGHTS
The note reads that the Articles of Association will not allow any shareholder to have “voting rights exceeding 30% of the votes cast at the meeting. It is also anticipated that there will be no transfer of existing double voting rights, but that new special double voting rights will accrue after a three-year share holding period following the completion of the merger.
THE REMUNERATION OF SHAREHOLDERS
Before the closing, FCA will distribute a special dividend of 5,5 billion euros to its shareholders, while PSA will sell its 46% stake in the components company Faurecia to the shareholders. In addition, FCA and PSA will each distribute an ordinary dividend of €1,1 billion in 2020 relating to fiscal 2019. Upon closing, PSA shareholders will receive 1,742 shares of the merged company for each PSA share held, while for PSA shareholders of FCA the exchange will be one for one.
FIRST OBJECTIVE: SUSTAINABLE MOBILITY
“The synergies will allow the new group to invest heavily in the technologies and services that will define mobility in the future – reads the joint note – contributing to the achievement of stringent global regulatory requirements on CO2 emissions”.
FCA and PSA speak of "sustainable mobility" as the first objective and add that "the new group will have a much more balanced geographical presence - explain the companies - with 46% of revenues generated in Europe and 43% in North America".
THE WORDS OF TAVARES, MANLEY AND ELKANN
Secondo Carlos Tavares, the transaction “represents a great opportunity to achieve an even stronger position in the sector through our commitment to lead the transformation towards a world with green, safe and sustainable mobility and to offer our customers excellent products, technologies and services ”.
Mike Manley, CEO of FCA, spoke of the union of “incredible brands and passionate and competent people”, recalling that both companies “have faced moments of extreme difficulty”, but “have come out of them even more agile, intelligent and formidable. Our people have one trait in common, that of looking at challenges as opportunities to be seized because they represent the way to make us even better at what we do".
“We are guaranteeing the future of our company, our brands and our people for decades to come,” added the manager in a letter sent by employees of the group. “We must celebrate this important result, but we must not take our eyes off the goal: we have challenging goals and high expectations to achieve as FCA during 2020. We try to make them all a reality".
“We have done great things – added the president John Elkann, again in the letter sent to employees -, each independently, but together we will do something truly extraordinary. FCA and PSA are strong companies, both tangible expressions of an exceptional level of personal dedication and relentless teamwork in all their respective activities.
BENTIVOGLI: TWO EMPLOYEES' REPRESENTATIVES ON THE BOD
The unions are also celebrating. Marco Bentivogli, leader of the Fim Cisl, explains that "in the next Board of Directors there will be two worker representatives, one for Psa and one for FCA". The trade unionist hopes "that the Italian government will take care of this merger: one of the largest industrial policy operations of the last 20 years".
