Following the signature of the binding Combination Agreement providing for a 50/50 merger with FCA, Phitrust persists its questioning and doubts concerning this operation.
Five major issues mentioned previously are not considered in a satisfactory manor:
– The merger parity has been calculated at the expense of PSA shareholders (which the first consequence is the drop of 9.9% of Groupe PSA’s stock price during the period of October 29th to December 17th, in comparison to the rise of 15.7% for the FCA stock price during the same period).
– With the proposed transfer of the head office in the Netherlands, where minority shareholders’ rights are less favorable than in France, the proposed governance does not seem to respect the Netherlands Code, which has minimum independence requirements: in order to respect this proportion John Elkann, nonexecutive Charmain, would in fact be considered as an executive manager…
– There is no mention of the possible break-up fees in case the Extraordinary General Meeting (EGM) rejects this merger proposal.
– There is no detail concerning the fees paid to the financial and operational players of this merger proposal.
– In addition, nothing precise is mentioned concerning an eventual liability guarantee regarding the possible fines that FCA could have to face in the USA and in Italy.
Our questions and doubts remain concerning:
1/ The pertinence of the distribution of 5.5 billion euros by FCA (which will be in part distributed to Exor), taking into consideration the urgent need to invest in order to fill FCA’s widely-recognized lack of investments.
2/ The relevance of the argument presented by Carlos Tavares of an American presence in the USA, a mass market in which Groupe PSA, with its mid-range models, would not present any competitive advantage, and which the only result would, without a doubt be shrinking profit margins
3/ The fear that this merger will translate into a significant salary increase in executive pays: the firms will notoriously use the argument of size in order to justify the explosion of what can be assimilated to a nonjustified cost incurred by shareholders.
PSA will hold its EGM in 2020 in order to approve or reject this 50/50 merger. This EGM should allow minority shareholders to exercise their responsibility one last time.
About SICAV Phitrust Active Investors France: Since 2003, the SICAV (French Mutual Fund) Phitrust Active Investors has been working with major listed companies to develop their environmental, social and governance (ESG) practices.
Phitrust – Denis Branche / Olivier de Guerre – Tel. : +33 (0)1 55 35 07 54 / 58