Posted Dec 18 2019 at 6:04 pm
Like all mergers “between equals”, the great Franco-Italian wedding of the day will not be free from risks. How to ensure, first, that the former shareholders of the two groups, PSA and Fiat Chrysler, are not injured? How can we guarantee balanced governance that respects everyone’s interests? A subtle game of balance, not necessarily easy to grasp over time.
It is indeed a 50/50 merger. But many analysts have judged, the day after the engagement announcement, that given the respective stock market prices, PSA actually paid a significant premium – up to 30% for some. “We rather estimate it at 11%, it is the counterpart to the governance scheme”, recognizes the director general of Bpifrance, Nicolas Dufourcq.
PSA Camp Bonus
In fact, the council of the new group will give a bonus to the “PSA camp”, at least initially. It will be made up of eleven directors: five appointed by the French group, and five by the Italian group (including President John Elkann, current president of FCA). The eleventh man will be Carlos Tavares: the president of the PSA executive board will be appointed general manager of the new group, for at least five years.
The balance of the deal is therefore largely based on the boss of PSA, considered as “THE” manager capable of carrying out the merger . However, according to several informed sources, nothing is planned in case of failure of the key man of the new set. Not today nor tomorrow. “The question of what will happen after five years has never been addressed,” said a stakeholder in the discussions.
French interests
The other big question is that of “French interests”, dear to the Peugeot family and to the French State, legitimately concerned about the French footprint of its national champions. Forced by the force of things to be diluted during the operation, the family and Bpifrance will hold only 6.25% each of the new group, after transfer and destruction of the titles that the Chinese Dongfeng will sell to PSA. Or 12.5% in total, while the Agnellis will own 14.5%.
The Peugeot will certainly have the right to acquire up to an additional 2.5% of the new set (or 5% of PSA before the merger). But at the same time Bpifrance may sell an equivalent stake. “We wanted to keep this possibility to reinvest in other companies,” explains Nicolas Dufourcq. Entered the capital of PSA in the midst of a crisis to save the manufacturer from bankruptcy, the French state does not intend, it is true, to stay there permanently. And it seems legitimate for Bpifrance to want to realize part of its added value.
Worst case scenario
Nevertheless: even if the public bank sells its titles to the family – which, according to our information, is indeed the planned scheme -, the famous “French interests” will remain lower than those of the Agnelli family. A risk considered trivial on this side of the Alps. “What matters to us is having a seat on the board,” says the CEO of Bpifrance.
No one wants to bet on the worst case scenario. But the history of companies is interspersed with mergers between equals that ended badly … especially for the French. The example of EssilorLuxotica, whose governance crisis hit the headlines , comes up a lot in conversations these days.