FCA, the French bank Société Générale contradicts Elkann: "Reviewing the merger with PSA"

• Collapse of the automotive market in Europe: -78.3% in April, Italy the worst. For FCA -87.7%
• Storm on the loan to FCA. Gualtieri: asked for clear commitments
• FCA asks Italy for a 6.3 billion public loan

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"It is time to review the terms of the merger between FCA and PSA." The French bank Societe Generale writes, which in fact contradicts what was declared last Wednesday by the president of FCA and Exxor, John Elkann, according to which the terms of the merger do not change because "they are written in stone".

The agreement, signed on 31 October and disclosed in detail last December, before the coronavirus, provided for the distribution by FCA of a maxi dividend of € 5.5 billion to its shareholders and the distribution by Psa of an asset, namely its 46% stake held in Faurecia.

According to Socgen, that agreement was based on prices and on a cash situation of the two companies very different from the current one. In practice none of the companies reflect those values ​​anymore. According to SocGen calculations, PSA, instead of generating 2.8 billion euros, will burn about 1.1 billion in cash, while FCA instead of generating 2.2 billion will not be able to count on 7.3 billion. So, according to SocGen, there are the conditions to proceed with a review of the agreement.

Article 7 of the agreement opens a new scenario.
In particular, the French bank cites Article 7, Section 7.2 of the merger agreement, which provides changes in case of "adverse material conditions". These new conditions, after the pandemic, have occurred and therefore a review is legally possible. SocGen reminds that the merger must be equal, so the market capitalization of FCA and PSA, net of what is distributed to shareholders, must be the same.

And then it does two scenarios. In the first, neither company distributes dividends or asset shares to shareholders. Based on this scenario, on the basis of the latest market prices, the value of FCA would be 10% higher than that of PSA.

In scenario number two, SocGen hypothesizes that PSA does not distribute the dividend from 1.1 billion but only the share of Fauresia (which is worth 2.1 billion), while FCA distributes the 5.5 billion to its shareholders. In this case, the market price would be too unbalanced towards the PSA, whose value would be 8.2 billion, against the 5.8 of FCA. In conclusion, according to SocGen, the review of the terms of the merger will have to be done and must be a middle ground between the two scenarios, even if scenario number 2 is the most realistic one.

Federacciai: just giving Fca 6.3 billion, benefit for the supply chain
For the president of Federacciai, Alessandro Banzato, it would be important for the entire supply chain that FCA received the 6.3 billion loan. "It would certainly be positive. Without going into political controversy, I speak from an industrial point of view. It is a question of introducing liquidity into the supply chain," he said, adding that "that is a driver of development and fundamental outlet for our products. The major steel channels are construction with 35%, mechanics with 20%, cars with 15%. So from the industry point of view, we consider the loan absolutely positive. mouth".