Combined Fiat-Peugeot to Weigh Special Dividend, Faurecia Divestment
Combined Fiat-Peugeot to Weigh Special Dividend, Faurecia Divestment
(Bloomberg) -- Fiat Chrysler Automobiles NV is considering a 5 billion euro ($5.6 billion) special dividend, while Peugeot maker PSA Group would offload its stake in car-parts supplier Faurecia SE as part of a potential combination of the Italian and French automakers, according to people familiar with the matter.
PSA’s sale or spinoff of its holding in Faurecia, worth about 3 billion euros, would help balance its value with that of Fiat, said the people, who asked not be named because the information isn’t public.
The combined company’s board would have 11 directors: five from PSA, five from Fiat and one seat for PSA Chief Executive Officer Carlos Tavares, who would keep the same role at the new entity, they said.
Fiat and Peugeot confirmed they’re holding discussions aimed at creating one of the world’s leading auto groups. The carmakers‘ boards are separately discussing the deal, and could announce the broad outlines of a potential combination as early as Wednesday, the people said.
A spokesman for PSA didn’t return a request for comment on the details of any deal, while a spokesman for Fiat declined to comment. Discussions on the exact structure of the transaction and board makeup are fluid, the people said.
Fiat shares gained 9.5% in Milan on Wednesday, while PSA rose 4.5% in Paris.
A merger of Fiat Chrysler and PSA, the No. 2 for car sales in Europe, would create a regional powerhouse to rival Volkswagen AG, and have a stock-market value of about $49 billion — comparable to Japan’s Honda Motor Co. The tie-up would also bring together two auto-making dynasties, the billionaire Agnelli clan in Italy and the Peugeot family of France.
Under the current proposal, the Agnelli’s holding, Exor, could become the single biggest investor in the combined entity, one of the people said. The carmakers are also discussing forming a Dutch holding company, the people said.
PSA owns a 46% stake in Faurecia, which has a market value of 5.96 billion euros. Tavares has raised the possibility in the past that PSA could divest the unit some day.
The companies’ talks come several months after Fiat Chrysler and PSA explored a partnership on pooling investment to build cars in Europe, and following the collapse in June of negotiations between the Italian-American carmaker and French competitor Renault SA.
Automakers face tremendous pressure to pool their resources for platform development, manufacturing and purchasing as they battle through trade wars, a global slowdown and an expensive shift toward electrification and autonomous driving. Producers face the additional burden in Europe of new rules on emissions.
Against this backdrop, the pace of dealmaking has picked up. Volkswagen in July said it will work with Ford Motor Co. on electric and self-driving car technology, while Toyota Motor Corp. is strengthening ties with partners such as Subaru Corp. and China’s BYD Co. The Indian conglomerate that owns Jaguar Land Rover has said it’s open to finding partners for the British automaker but isn’t planning on selling the embattled unit.
Dismal car sales have also added to the mix. Volkswagen on Wednesday lowered its outlook for vehicle deliveries this year due to a faster-than-expected decline in auto markets.
In any deal with Fiat, the French government would play a key role because France is one of the biggest owners of PSA, whose brands also include Opel, Vauxhall and Citroen. The French finance ministry signaled support for the deal Wednesday, while warning it would scrutinize the jobs impact and governance structure of the new company, as well as its commitment to build a European battery-maker.
Tavares is likely to keep the CEO title at the combined company while John Elkann, scion of the Italian-American automaker’s founding Agnelli family, would be chairman, the people said. Cost cuts would focus on administrative roles rather than factory jobs, and no plant shutdowns were planned, though that could change, the people said. PSA’s head of human resources told unions Wednesday no plants shutdown were planned in France.
PSA has been floated as a logical merger partner with Fiat, because of their complementary product and geographic fit, and the two sides discussed partnership possibilities this year. However, the Italian-American carmaker instead pursued a deal with Renault. Those talks were called off in June due to opposition from the French government stemming from a lack of support from Renault’s Japanese alliance partner Nissan Motor Co.
Fiat Chrysler is seen as a laggard in new technologies such as electrification and autonomy, which are expected to cost automakers billions of dollars over the next decade. The company has sought to secure its future with a larger partner for several years, dating back to late CEO Sergio Marchionne’s failed courtship of General Motors Co. After being rebuffed by GM in 2015, rumors of talks with other automakers have swirled with varying intensity.
To contact the reporters on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net;Tommaso Ebhardt in Milan at tebhardt@bloomberg.net;Ania Nussbaum in Paris at anussbaum5@bloomberg.net
To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel
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