Posted on Sep 16, 2020 at 6:45 am
But why have the major shareholders of PSA not sought to push their advantage? Number of observers would have deemed legitimate a renegotiation of the terms of the merger with FCA, and the financial markets have long expected this, given the financial development of the two fiancés since the signing of their marriage contract in December. The Phitrust fund, for example, a minority shareholder of PSA, had openly campaigned for this in the spring.
However, the measures announced Monday evening (reduction of FCA’s exceptional dividend from 5.5 to 2.9 billion euros, distribution of half of PSA’s stake in Faurecia to FCA shareholders), on the contrary, respect scrupulous fairness in the efforts required of the shareholders of both groups.
Some already considered the deal unbalanced in favor of FCA before the coronavirus. And the gap seems to have widened since: the health crisis has shown vividly that PSA is in much better shape than FCA. The tricolor manufacturer managed to stay in the green, posting a net profit of 600 million euros in the first half despite sales having plummeted by 46%. With volumes down 37%, her Italian-American fiancé plunged into the red, having suffered a net loss of 2.7 billion euros.
Never renegotiate a concluded agreement
However, the PSA shareholders present around the table (the Peugeot family, the Chinese Dongfeng, as well as the French state via bpifrance) did not wish to renegotiate the major balances of the operation. Without even mentioning the 500 million euros in penalties to be paid in the event of a breach, they considered that the best interest in carrying out the merger outweighed by far the few hundred million to be gained in the short term. FFP, the Peugeot family holding company, just like bpifrance, also showed their support for the announced changes on Tuesday.
At a time when the automotive industry is facing a profound change requiring heavy investments, there was no question of taking the risk of seeing the great marriage fail. Especially since the abandonment of the assignment of the reinsurer Partner Re in Covea, last May, showed that the Agnelli family (the main shareholder of FCA) were capable of making radical decisions to apply their golden rule: never renegotiate a concluded agreement.
Attempted destabilization
PSA shareholders, led by the Peugeot family, are convinced that the French manufacturer, as profitable as it is today, cannot go it alone for long. “PSA could not remain strong indefinitely in Europe and weak elsewhere”, explained the CEO of FFP, Robert Peugeot, at the “Echos” in December .
The president of the PSA board, Carlos Tavares, has it too hammered over the months. The benefits of such a merger “are assessed over a period of ten years, not to say twenty”, he declares to whoever wants to listen, even considering that the pressures towards a rebalancing were part of the “attempt destabilization ”. As proof, the two groups finally plan that their marriage will generate 5 billion euros in synergies, instead of 3.7 billion initially, they also announced Monday evening.
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