Fiat Chrysler Automobiles NV agreed to shrink a dividend tied to its merger with PSA Group by 2.6 billion euros (US$3.1 billion) to shore up the combined company’s finances in the wake of the COVID-19 pandemic.
The special cash payout to Fiat Chrysler shareholders is to be reduced to 2.9 billion euros from 5.5 billion euros, the automakers said on Monday evening.
The reduction would be partially offset by the Italian-American company’s investors getting a stake in French supplier Faurecia SE, and the boards of both automakers are to consider an additional dividend later.
The changes would give PSA CEO Carlos Tavares more cash to work with as he takes the helm of an empire making Peugeots in France, Alfa Romeos in Italy and Jeeps in the US. He has his work cut out for him after COVID-19 forced manufacturers to shut their showrooms and plants for much of this year.
While “neutral in theory,” as the reduced distributions accrue to the combined company’s balance sheet, the new terms on balance “are skewed to PSA,” Jefferies analysts led by Philippe Houchois wrote in a note. “FCA’s shareholders are now assuming some market risk on Faurecia shares.”
The new dividend terms are somewhat of a setback for the Agnelli family that controls Fiat Chrysler, which is led by chairman John Elkann, but as a consolation for the smaller cash payout, PSA and Fiat Chrysler holders are each to receive 1.36 billion euro stakes in Faurecia after their merger closes.
Under the original terms of the deal, PSA was going to distribute its entire 46 percent stake in Faurecia to only its investors.
The Fiat Chrysler and PSA boards are also to consider a potential distribution of 500 million euros to each company before they close their deal, or 1 billion euros afterward to shareholders of the combined entity, which is to be named Stellantis.
The companies also raised the estimated annual synergies from the combination to 5 billion euros from 3.7 billion euros, and the one-time cost of implementing them to as much as 4 billion euros.
“The big question in our minds is where the 5 billion-euro synergy total came from,” RBC Capital Markets analyst Tom Narayan wrote in a note. “PSA has long said that they would not close plants for either party.”
Other unknowns include possible asset sales and how PSA would integrate FCA into its strategy to comply with Europe’s tough emissions rules, he said.
Exor NV, the Agnelli family’s investment company, said that it remains committed to the deal, which is expected to be completed by the first quarter of next year.
“Exor strongly supports the steps taken by the companies to maintain the economic value and balance within the original combination agreement, while enhancing the strength of the capital structure of Stellantis at launch,” the company said in a statement.
RECORD BUDGET: TSMC does plan to raise its proposed capital expenditure a lot, and could benefit if Intel outsources more of its production to foundries, analysts said Intel Corp’s earnings conference call on Thursday is expected to clarify the US semiconductor giant’s outsourcing production plans, which would be crucial regarding Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) performance, analysts said. “TSMC stands to benefit if Intel outsources more of its fabrication to foundries,” SinoPac Securities Investment Service Corp (永豐投顧) analysts said in a note on Friday. Yuanta Securities Investment Consulting Co (元大投顧) was more cautious, saying that Intel’s contribution initially would be limited, but its outsourcing plans would still highlight TSMC’s leadership in technology, it added. “Intel will continue to manufacture server or high-end central processing units [CPUs], which have higher
MOBILE SMART: The Dimensity 1200 is 22 percent better in terms of performance than its predecessor, and 25 percent more power-efficient, the handset chip designer said MediaTek Inc (聯發科) yesterday unveiled its premium 5G processors — the Dimensity 1200 and Dimensity 1100 — as it vies for a larger slice of the world’s rapidly growing 5G smartphone market. Manufactured using Taiwan Semiconductor Manufacturing Co’s (台積電) 6-nanometer process technology, the Dimensity 1200 processor performs 22 percent better than the previous generation Dimensity 1000+ processor, and is 25 percent more power-efficient, MediaTek said. Chinese smartphone brands Xiaomi Corp (小米) and Realme Mobile Telecommunications (Shenzhen) Co (銳爾覓移動通信) are to be the first adopters of the latest Dimensity chips, the companies said during a virtual media briefing. Xiaomi plans to equip its first
Norway’s oil and gas reserves have made it one of the world’s wealthiest countries, but its dreams for deep-sea discovery now center on something different. This time, Oslo is looking for a leading role in mining copper, zinc and other metals found on the seabed and in hot demand in green technologies. The country could license companies for deep-sea mining as early as 2023, the Norwegian Ministry of Petroleum and Energy said, potentially placing it among the first countries to harvest seabed metals for electric vehicle batteries, wind turbines and solar farms. However, that could also place it on the front line of
‘BROAD RANGE’: The US Department of Commerce intends to deny a significant number of license requests for exports to Huawei, an industry association said US President Donald Trump’s administration notified Huawei Technologies Co (華為) suppliers, including chipmaker Intel Corp, that it is revoking certain licenses to sell to the Chinese company and intends to reject dozens of other applications to supply the telecommunications firm, people familiar with the matter told reporters. The action — likely the last against Huawei under Trump — is the latest in a long-running effort to weaken the world’s largest telecommunications equipment maker, which Washington sees as a national security threat. The notices came amid a flurry of US efforts against China in the final days of Trump’s administration. US president-elect Joe