The proposed merger between FiatChrysler Automobiles (FCA) and Peugeot S.A. (Groupe PSA) was consummated Dec. 18, 2019, giving the global automotive marketplace a smaller footprint as a new decade begins. The actual closure of the agreement takes place about a year from formation of the agreement.
What will now be the fourth largest OEM conglomerate (by volume; third largest by revenue) selling cars, trucks and SUVs provides for a 50/50 merger of both businesses that will have annual sales of 8.7 million vehicles with revenues nearing 170 billion Euros, recurring profit of over 11 billion Euros and an operating profit margin of 6.6 percent, all on a simple aggregated basis of 2018 results.
Both FCA and Groupe PSA believe they have combined to furnish leadership, resources and scale that should encompass sustainable mobility in the future. John Elkann has been named Group chairman and Carlos Tavares is Group CEO; they intend to work with a majority of independent directors, having gained the strong support of long-term shareholders they intend to be represented on the combined firm’s Board of Directors.
Most important, the merger’s principals intend to keep all plants in operation as a result of this transaction and are intending to have net cash flow positive from the first year. The new entity believes the gains in efficiency derived from larger volumes, as well as the benefits of uniting the two companies’ strength and core capabilities should ensure best-in-class products, technologies and services to customers, together with the agility to make quicker adjustments to market changes.
FCA, of course, has its primary strengths in the North and South American markets, where its SUVs and trucks are the paramount products. PSA’s solid position on the European continent allows the newly-formed group to have greater geographic balance, with 46 percent of revenues derived from Europe and 43 percent from North America, also based on 2018 figures for each company.
More than two-thirds of the merged company’s volumes will be concentrated on two platforms, with about three million cars per year on each small platform and the compact-mid-size platform.
The merger of FCA and Groupe PSA will have an 11-member Board of the Directors, the majority of whom will be independent of the two companies. Five members will be nominated by FCA and its reference shareholder (including Elkann as Chairman) and five will be nominated by Groupe PSA and its reference shareholders (including the senior non-executive director and the vice chairman). At closing, the Board will include two members representing the employees of both companies. Carlos Tavares will be CEO for an initial term of five years, taking his place on the Board.
Mike Manley, currently CEO of FCA, stated, “This is a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait – they see challenges as opportunities to be embraced and the path to making us better at what we do.”
Tavares, who holds forth as chairman of the managing board of Groupe PSA, said, “Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility, and to provide our customers with world-class products, technology and services.”
The new group’s Dutch-domiciled parent company will be listed on Euronext in Paris, the Milanese Borsa Italiana and the New York Stock Exchange. Before closing this merger, shareholders of both FCA and Groupe PSA will benefit from special dividends. It is expected completion of the combined companies will culminate in 12-15 months, subject to customary closing conditions, which includes approval by both companies’ shareholders and the satisfaction of antitrust and other regulatory requirements.
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