Business Essentials for Professionals


PSA-Fiat Merger - French Shareholders Want Board Advantage Guarantee: Reuters

PSA-Fiat Merger - French Shareholders Want Board Advantage Guarantee: Reuters
In the latest twist to the planned merger of PSA and Fiat Chrysler, a unique demand has been put forward by French shareholders: the companies should ensure that after the merger, they will continue to have a numerical advantage on the new board for the new company in the eventuality that the exit of PSA CEO Carlos Tavares, reported the news agency Reuters quoting unnamed sources with knowledge of the matter,
The two companies had announced their planned merger in October which is currently being finalized by representatives of the two companies for the deal that is worth $50 billion. It is being touted that the merger will create the fourth largest auto maker of the world.
However it has been agreed that the eleven seats on the board of the merged entity will be equally shared at 5 each between the PSA and Fiat Chrysler according to the terms of the draft Memorandum of Understanding (MoU) between the two companies. The eleventh seat on the board would be given to the Tavares, who is chief executive of PSA and will retain the same position for the new merged entity.
The de-facto role of senior partners in the merged new entity will go to the French shareholders because of the eleventh seat going to Tavares on the board. However the French shareholders now wants to get an assurance that this advantage on the board of the company would be available to them even after Tavares leaves the company or relinquishes the position, reported Reuters quoting sources.
The report also claimed, quoting sources close to FCA, that whether or not this new demand by the French shareholders has emerged as a hurdle in the talks between the tow companies for the merger is not yet clear. The Reuters report further stated that the French shareholders were also not raising any question about the draft agreement over the new group’s governance and they were also not attempting to slow down the merger.
The supervisory board of PSA, the owner of the Peugeot and Citroen brands, is scheduled to meet next Tuesday where the FCA deal could also come up for discussions, said reports.
The merger could get completed by the end of the year, both the companies have said. However before the MoU sealing the deal is signed, the French shareholders want the issue to be sorted out.
The French group’s shareholders were paying “an implicit control premium (...) while there was no real control of PSA on FCA”, said shareholder advisory company Proxinvest in a note.
No comments on the issue was were available from PSA, the BPI public investment bank representing the French government’s shareholding and FCA.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc