Fiat Chrysler’s decision to scrap its dividend has set another setback for plans by the Agnelli family’s Exor arm to raise cash following a $9 billion sale of its reinsurer unit PartnerRe collapsed this week.
Fiat Chrysler and Peugeot owner PSA which have agreed a tie-up to form the world’s fourth largest automaker, stated on Wednesday they were both withdrawing their annual dividend. That will permit them each to preserve 1.1 billion euros ($1.2 billion) in cash to survive during the coronavirus crisis.
Exor, led by Agnelli scion John Elkann and Fiat Chrysler’s controlling shareholder with a 28.9% stake, will miss out on around 320 million euros ($346 million) in cash at a time when two deals to reorganize its portfolio of businesses have either been scrapped or postponed.
The coronavirus crisis had already forced automobile and equipment maker CNH Industrial, also controlled by Exor, to postpone late 2021 “or beyond” a plan to split in two and list its truck, bus and engine business, which was initially due to be finished by early next year.
All eyes are now on the upcoming $50 billion FCA-PSA merger.
The two automakers stated on Wednesday that plans for their planned 50-50 merger were “advancing well” and that the shutting down was expected on schedule, prior to the end of the first quarter of next year.
The sale of Bermuda-based PartnerRe foundered after Exor resisted attempts by French insurer Covea to drive down the cost of the cash deal.
Some observed that as a warning shot to PSA not to attempt the same tactics with FCA where Elkann is the chairman.
“With its decision not to accept a discount on PartnerRe, Elkann has sent a strong message to PSA and its CEO (Carlos) Tavares,” an investment banker close to the situation, who asked not to be named, informed Reuters.
“The message is: don’t expect to come around and get much different conditions on the FCA-PSA merger”.
The decision to scrap payment of ordinary dividends, which had been announced in December as part of the tie-up agreement between the two automakers, did not modify the terms of the deal as both companies took the same step.
Analysts are, however, concentrating on a 5.5 billion euro special dividend FCA is set to pay to its investors just before completing the merger.
The spread of COVID-19 has hit assert valuations hard and raised questions regard the terms of deals struck before the virus swept throughout the world. Shares in both FCA and PSA are both dropped around 45% this year.
Exor’s other investments consists of Ferrari, Italian soccer champions Juventus, stake in GEDI, and weekly magazine the Economist.