Shares in Fiat Chrysler (FCA) rose sharply in Milan on Tuesday after the auto maker and French partner PSA revised the terms of their merger deal, with FCA's shareholders getting a smaller cash payout but a stake in another business.
They said in a joint statement that FCA would cut to €2.9 billion the cash portion of a €5.5 billion special dividend its shareholders will receive under the terms of the accord they signed past year.
The tie-up, which was announced at the end of October, will create Stellantis, set to be the world's fourth-largest automaker in terms of volume, and number three in terms of sales.
However, PSA will for its part delay the planned spinoff of its 46% stake in vehicle parts maker Faurecia until after the deal is finalized.
The exceptional dividend that FCA was to distribute to its shareholders along with the distribution of Faurecia's shares were also issues of concern, since the French equipment makers's market capitalization has declined since the merger's announcement.
Based on Stellantis' 50-50 ownership structure, FCA and PSA respective shareholders will each receive a 23% stake in Faurecia.
FCA and PSA said annual estimated synergies from their merger were now seen at more than €5 billion, compared with an initial estimate of over €3.7 billion. The merger is expected to take place by the end of the first quarter of 2021.
"Of the two, FCA might be a bit more of a victor in the short term given the structure of the deal and the numerous payouts to shareholders to come in the quarters ahead (potentially close to 5 billion euros versus the current capitalization of around 16 billion euros)". It has also been agreed that the Boards of both FCA and PSA will consider a potential distribution of €500 million ($594 million) to the shareholders of each company before closing or, alternatively, a distribution of €1 billion ($1.19 billion) to be paid following the close to all Stallantis shareholders.
FCA CEO Mike Manley had said last week he and PSA CEO Carlos Tavares were aware of the need for the two firms to get to the merger with the strongest balance sheet possible.