PSA and FCA Sign Merger Agreement

On December 18, Fiat Chrysler announced in a statement that it had entered into a binding merger agreement with Peugeot Motors (PSA). The contents of the agreement are as follows:

The agreement stipulates that the two parties will merge at a ratio of 50:50, and the combined new group will become a leader in the industry, which is expected to create the world’s fourth-largest automobile sales group by sales volume.

The announcement pointed out that based on a simple summary of the 2018 results of both parties, the combined company’s annual sales will be 8.7 million units, revenue will be close to 170 billion euros, recurring operating profit is expected to exceed 11 billion euros, and an operating profit margin of 6.6%. “A strong consolidated balance sheet will provide significant financial flexibility and ample space throughout the cycle to execute strategic planning and invest in new technologies.”

At present, FCA has a good business share in North America and Latin America, while PSA has a solid position in Europe. After the merger, the new group will have “greater geographic balance.”

Also calculated based on the 2018 annual performance data, in the future, 46% of the new group’s revenue will come from Europe, and 43% of its revenue will come from North America.

At the product level, based on PSA and FCA’s existing brand composition, PSA’s Peugeot, Citroen, DS, Opel, Vauxhall, FCA’s Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Lancia, Maserati and RAM All other brands will be retained; therefore, the combined entity will cover all key market segments including ultra-luxury vehicles, luxury vehicles, mainstream passenger vehicles, trucks and light commercial vehicles.

After the merger, the new group will optimize the use of model platforms, engines, and new technologies. These technologies, products and platforms will save about 40% of the total cost of synergies of the annual operating rate of € 3.7 billion; the other 40% will be the main source Optimize the purchase price due to scale; the remaining 20% ​​will be optimized in the areas of marketing, management expenses and logistics costs. Based on this, it is expected that from the first year after the merger, the synergy will bring positive net cash flow to the new group, and by the fourth year, it will achieve about 80% of the synergy.

In addition, the merged entity will rely on the global R & D layout to realize product and technology changes in the fields of new energy vehicles, sustainable mobility, autonomous driving and connected cars.

Tang Weishi as CEO

In terms of personnel structure, the board of the new group consists of 11 members, most of whom are independent directors. FCA and PSA each nominated five board members, and the board will include two FCA and PSA employee representatives. Tang Weishi (current Chairman of the PSA Management Committee) will serve as CEO, with an initial term of five years, and will serve on the board.

The announcement also states that the parent company of the new group registered in the Netherlands will be listed on Euronext, Italian Exchange and New York Stock Exchange. “According to the proposed charter of the new group, no shareholder is entitled to exercise more than 30% of the total number of votes at the general meeting of shareholders.”

Dongfeng Group holds 4.5% of New Group

In addition, after the merger is completed, the suspension period of shares held by EXOR NV, French National Investment Bank, Dongfeng Group and Peugeot Family (EPF / FFP) will be 7 years. Buying stocks on the market will increase your holdings in the combined entity by up to 2.5% (or 5% relative to the PSA level). The holdings of EXOR, the French National Investment Bank and the Peugeot family will be locked for three years, but allow the French National Investment Bank to reduce its shareholding in PSA by 5% or 2.5% in the combined entity.

Before the transaction ends, Dongfeng Group will sell 30.7 million shares to PSA, and these shares will be cancelled; Dongfeng Group’s remaining shares in PSA will be locked until the transaction is completed. After completion of the transaction, Dongfeng Group will own 4.5% of the new group.

Before the closing of the transaction, FCA will distribute a special dividend of 5.5 billion euros to its shareholders, while PSA will distribute 46% of its shares in Faurecia to its shareholders. After the transaction is completed, FCA will divest Comau’s equity.

In addition, the merger is expected to be completed in 12 to 15 months.

Gasgoo Comments: From the “official announcement” at the end of October to the signing of a binding merger agreement, the merger of PSA and FCA is proceeding in accordance with the established pace and goals of both parties. This cooperation, whether in terms of enterprise size or brand influence, is enough to have a profound impact on the pattern of the automotive industry.

The combined new group will have 13 brands, which has surpassed Volkswagen and GM in number. In addition, most of these 13 brands have deep historical accumulation. Although some audiences are small, their influence in their market segments cannot be underestimated, such as Alfa Romeo, Lancia, Chrysler, etc.

Regarding this cooperation, the general opinion in the industry is that the automotive industry is in a transitional and upgrading environment. In the face of the turbulent new four modernizations, traditional car companies have begun heating up to save costs, optimize cash flow, and successfully complete the transition. From the perspective of the new group’s future development, it is optimizing its resources and is committed to achieving new breakthroughs in new energy, mobile travel, autonomous driving, and connected cars. Therefore, facing the future, the synergy effect brought by the new company will help it successfully complete the transition to the new four modernizations.