STLA Stellantis NV

By Nick Kostov and Ben Dummett 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 18, 2019).

The boards of Peugeot maker PSA Group and rival Fiat Chrysler Automobiles NV on Tuesday backed a binding merger agreement that includes sweeteners to make the trans-Atlantic tie-up more attractive to U.S. regulators and PSA shareholders, according to people familiar with the discussions.

The two boards voted to sign a memorandum of understanding, fixing the financial terms of the deal and the corporate governance structure of the combined company, the people said.

The move marks an important step in solidifying a merger that was announced by the two auto makers in October. The tie-up aims to create a $50 billion auto giant that would rank among the world's largest car companies by sales.

The deal comes at a time of mounting cost pressures in the global car business, with auto companies investing billions in new technologies, such as electric cars, as demand for cars and trucks in the top auto markets weakens after a period of strong growth.

Among the new terms added over the past several weeks were agreements that China's state-run Dongfeng Motor Group Co. would sell part of its 12.2% stake in PSA back to the French car maker and that Fiat Chrysler will keep its Comau division at least until the closing of the deal, the people close to the talks said.

Dongfeng's decision to reduce its stake in PSA is designed to help the deal gain approval from the Committee on Foreign Investment in the U.S., which is likely to review the merger proposal at a time of heightened trade tensions between the U.S. and China, the people said.

Dongfeng would end up with a roughly 4.5% stake in the newly combined auto company and won't be entitled to a seat on its board, they said.

The two sides also have changed the deal so the combined company entity will retain Fiat Chrysler's Comau division, a maker of robotics technology used in vehicle manufacturing, rather than spin it off as previously planned, the people familiar with the matter said. That would allow PSA and Fiat Chrysler shareholders to benefit from any sale of the Comau division, the people said.

Jefferies has valued Comau at some EUR250 million.

Both Fiat Chrysler and PSA shareholders must approve the deal through a vote, likely to occur next fall, those people said.

Once the merger agreement is signed, the two companies will next need approval from both U.S. and European regulators to move forward with the tie-up. They will also need the backing of various banking authorities, since the companies own substantial financing operations across the globe. Both companies aim to have the merger completed by the end of 2020.

The original proposal outlined terms in which Fiat Chrysler will pay a special dividend of EUR5.5 billion to its shareholders. By comparison, PSA will distribute to its shareholders the company's 46% stake in auto parts supplier Faurecia, which is worth around EUR3 billion. The value difference raised concerns among PSA investors that they weren't getting as good a deal as Fiat Chrysler shareholders.

In vetting the merger proposal, PSA lawyers reviewed a recent civil lawsuit filed by U.S. rival General Motors Co., accusing Fiat Chrysler of paying bribes to union officials in the U.S. to win it a more favorable labor-cost advantage. The attorneys, however, agreed with Fiat Chrysler's assessment that the lawsuit was meritless and ultimately decided it wasn't a major hurdle to the deal, say people close to French car maker.

In reviewing the deal, U.S. regulators would be likely to latch onto Dongfeng's ownership stake in PSA and its board seat as a red flag, especially given the Trump administration's focus on the auto industry and Chinese intellectual property theft, said John Kabealo, a lawyer whose practice focuses on business-related national security issues.

"That would trigger significant concerns," Mr. Kabealo said.

The Treasury Department, which handles press inquiries for the Committee on Foreign Investment in the U.S., declined to comment, saying it doesn't provide information on specific merger reviews or whether a company has filed for one, a spokeswoman said.

If completed, the merger will create the world's fourth-largest auto maker, uniting the owner of brands such as Dodge, Ram, Jeep and Alfa Romeo with a stable of brands that includes Peugeot, Citroën, Opel and Vauxhall. The new company will produce almost as many cars in Europe as Volkswagen AG, the continent's largest car maker, and will have a large presence in the U.S. and South America.

More than 50 people across the two companies have been working on the merger project since PSA and Fiat Chrysler announced their deal several weeks ago. The negotiation process has been overseen by Doug Ostermann, Fiat Chrysler's group treasurer and global head of business development, and Olivier Bourges, PSA's executive vice president for program and strategy groups.

The two car makers previously said that John Elkann, Fiat Chrysler's chairman, will become chairman of the newly merged company, while PSA Chief Executive Carlos Tavares will be CEO with an initial five-year term.

Ben Foldy contributed to this article.

Write to Nick Kostov at Nick.Kostov@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

December 18, 2019 02:47 ET (07:47 GMT)

Stellantis NV (BIT:STLA)
Gráfico Histórico do Ativo
De Mar 2024 até Abr 2024

Stellantis NV (BIT:STLA)
Gráfico Histórico do Ativo
De Abr 2023 até Abr 2024