MILAN, Dec. 18 (Class Editori) – Electricity in Europe and expansion in the Chinese market: these are the two targets that Carlo Tavares, CEO of the Peugeot group, put at the center of the Fca-Psa group's strategy, of which he announced today the birth, in the context of a 50% merger between the two car manufacturers, who will lead it. Mike Manley, CEO of Fca, presents at the conference call with analysts, will become senior executive.
"In China there is a lot of work to do, so far we have not yet had the necessary success. With the closing of the agreement with Fca we will work to strengthen our presence in that market", insisted Tavares.
In the shareholding of the new group, the Chinese Dfg controlled by the Dongfeng family, will be present with a 4.5% stake and a 7-year standstill period is scheduled starting from the completion of the merger for the shareholdings of Exor, Bpifrance, Dongfeng Group (Dfg) and the Peugeot family. In order to achieve the goal of having a majority of independent directors, 5 of the 9 non-executive directors of the new group must be independent.
Carlos Tavares, CEO of Psa, spoke in a conference call with journalists and the market, together with the CEO of Fca, Mike Manley. The top management of the new group does not expect surprises in terms of Antitrust and estimates that the synergies achieved by the two groups may even be greater than those announced, 3.7 billion a year in full operation.
"I am proud to announce the agreement for the merger between Fca and Psa, we have done a very intense job, and extensive due diligence has been implemented. I'm not only proud but also excited about the new adventure," said Tavares, "this is an aggregation between two healthy groups: both are useful and we must be able to leverage the forces of the two groups, which are complementary" .
The group set up from the merger between Fca and Psa will have the most appropriate dimension to guarantee an offer of vehicles based on sustainable mobility but also economically accessible for consumers, stressed Tavares
The company resulting from the merger will have an annual production of 8.7 million vehicles, with revenues of almost 170 billion euros, a current operating profit of over 11 billion euros and an operating margin of 6.6%, based on the aggregation of the 2018 results.
The challenge of the new reality is not only about clean mobility to meet the increasingly stringent parameters of carbon dioxide emissions, but also about the costs of mobility that must be accessible. The group, meanwhile, is on the right path to meet the requirements on carbon dioxide emissions imposed by EU regulations in 2021.
Manley, explained Tavares, will remain in the group with a senior executive role. John Elkann and Tavares will be president and CEO of the new reality for an initial term of five years.
"We have complementary strengths. Now we can concentrate on executing the merger," Manley pointed out. "The opportunities of this merger are there for all to see: the geographic, technological synergies and the management's ability to execute. We are fighters and we are now ready to fight the challenges of the global market".
For Moody's, a combination of the two groups would be positive in terms of creditworthiness. "For Psa, a successful combination with Fca would position the company more solidly in the Baa3 rating category, mainly due to improved regional diversification and proposed synergies. The positive prospects for Fca ratings reflect the potential for a stronger credit profile than the combined FCA and PSA entity in the event that the proposed merger is successfully executed," the analysts of the agency wrote.
The new group will have a balanced presence and profitable activities at a global level, with a portfolio of iconic and highly complementary brands covering all the main segments from luxury to premium, from mainstream passenger vehicles to SUVs, trucks and light commercial vehicles. This is thanks to the strength of Fca in North America and Latin America and to the solidity of Psa in Europe.
The new group will have a much more balanced geographical presence, with 46% of revenues generated in Europe and 43% in North America, based on the aggregation of the 2018 data of the two companies. This new group will have the opportunity to redefine the strategy in other regions.
The new parent company based in the Netherlands will be listed on Euronext (Paris), Borsa Italiana (Milan) and on the New York Stock Exchange and will benefit from its strong presence in France, Italy and the United States.
The savings associated with technologies, products and platforms are expected to represent around 40% of the 3.7 billion euros of annual synergies in full operation, while savings related to purchases - which will mainly benefit from economies of scale and alignments to best price - will represent an additional 40% of these synergies.
The one-off cost to achieve these synergies is estimated at 2.8 billion euros. These synergies will allow the new group to invest heavily in the technologies and services that will define mobility in the future, contributing to the achievement of stringent global regulatory requirements on CO2 emissions.
The Italian-American reality will continue to work on the separation of the stake held in Comau, which will be carried out as soon as possible after completion of the transaction, for the benefit of the shareholders of the new group.
The representation of workers will be in compliance with the legislation in force. Bpifrance will include both Bpifrance Participations and its subsidiary Lion Participations Sas (Epf/Ffp). The only exception is that Epf/Ffp will be allowed to increase its stake in the company resulting from the merger (or 5% at Groupe Psa level) by 2.5% by buying shares from Bpifrance or Dfg or on the market. Exor, Bpifrance and Epf/Ffp will also be subject to a 3-year lock-up period in relation to their respective holdings.
The only exception is that Bpifrance will be allowed to reduce its stake in Groupe Psa or 2.5% in the company resulting from the merger by 5%. Dfg has agreed to sell, and Groupe PSA has agreed to purchase 30.7 million shares before closing (those shares will be canceled). With reference to the remaining shareholding in Groupe Psa, Dfg will be subject to lock-up until the completion of the transaction.
Exor, Bpifrance, the Peugeot family and Dongfeng have individually and irrevocably committed to vote in favor of the operation in the respective shareholders' meetings of Fca and Groupe Psa.
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