Fiat Chrysler, Peugeot Scrap Billion-Dollar Dividends as Merger Faces Pressure -- Update
14 Mai 2020 - 12:32PM
Dow Jones News
By Ben Dummett
Fiat Chrysler Automobiles NV and Peugeot maker PSA Group
canceled dividend payments they promised their shareholders that
were part of a broader agreement to merge, but said the deal
remains on track.
Both companies had previously warned their annual dividends for
2019 were under review amid an industrywide scramble to raise and
save cash to weather the coronavirus pandemic. The planned
dividend, amounting to EUR1.1 billion ($1.2 billion) for each
company, was an important component in the merger deal.
In a release issued late Wednesday night, Fiat and Peugeot said
they remained on track to complete the planned multibillion-dollar
tie-up before the end of March 2021. Merger preparations "are
advancing well, including with respect to antitrust and other
regulatory filings," the car makers said in a joint statement.
Still, the dividend cancellation highlights the pressure both
companies are under to push the complex deal through amid tumult in
the global car industry and the world's stock markets. The pact,
agreed to late last year, was structured mostly as a stock swap.
But it also included two sets of cash payouts designed, in part, to
equalize valuations between the two companies and achieve a
so-called merger of equals.
The deal is a bet that a combination would give the two greater
financial heft and broader geographic reach to better equip them to
manage the high costs of investing in autonomous and electric
vehicles. Executives at both companies think that strategic
rationale is even stronger amid the pandemic, people familiar with
the matter have said.
Fiat Chrysler is still on the hook to distribute a separate
EUR5.5 billion dividend to its shareholders as part of the merger
deal.
Fiat Chrysler shares were down 1.7% in Europe trading, while
Peugeot shares were 3.4% lower.
Write to Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
May 14, 2020 06:17 ET (10:17 GMT)
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