PSA seeks to shift Fiat Chrysler merger into high gear

The teams working on the merger of carmakers PSA Group and Fiat Chrysler (FCA) are "picking up the tempo" to finalise the merger, the head of the French automaker has said in comments received Thursday by AFP.

The tie-up was announced at the end of October and originally scheduled to be finalised in early 2021 at the latest, in order to create the world's fourth-largest automaker, bringing under one roof brands like Peugeot, Citroen, Jeep, Alfa Romeo and Maserati.

But the coronavirus pandemic has throttled production at carmakers around the world as countries shut businesses and order people to stay at home to slow the spread of the deadly respiratory disease COVID-19.

The lockdowns have also hurt sales, and with the world entering a deep recession, the share prices of automakers have slumped.

That has called into question the financial terms of the merger, according to sources working on the transaction.

But PSA chief executive Carlos Tavares said the groups working on the merger at both automakers are speeding things up, according to comments made at meeting last week of the committee coordinating the merger.

- Merger: 'sooner the better' -

"Working groups are maintaining or even accelerating the rhythm on the project during this crisis to achieve the closing" of the deal, Tavares said according to a statement sent to AFP.

"The sooner the better," he added.

The two groups need the merger in view of the heavy investments that must be made in electric cars.

The merger plans include each paying a dividend of 1.1 billion euros to their respective shareholders for 2019.

However the French government has put pressure on companies, especially those that tap government crisis aid, to not distribute dividends and instead hold onto cash to continue operations.

"The dividends are part of the project, and the payment of dividends hasn't been called into question," a PSA spokesman told AFP.

I would be discussed at a shareholders meeting set for June, he said.

"I haven't seen any signs we're going to reopen the terms of the agreement," he added.

But analysts wonder whether the terms of the planned merger of equals need to be adjusted.

That is because while FCA was also expected to pay an extraordinary dividend of 5.5 billion euros, PSA was to distribute to its shareholders its 46-percent stake in car parts manufacturer Faurecia.

But Faurecia's share price has now fallen, meaning the deal is even less advantageous to PSA shareholders.