MILAN (Reuters) – Milan-listed shares in Fiat Chrysler FCHA.MI rose sharply in early trade on Tuesday, after the group and Peugeot maker PSA PEUP.PA revised the terms of their planned merger.
Fiat Chrsyler shares were up more than 5% at 0730 GMT, while PSA reversed gains to stand down 1.5% after opening around 1% higher.
The companies, set to merge into the world’s fourth largest carmaker, Stellantis, said late on Monday they wanted to conserve cash and stepped up promised levels of cost cutting.
They said they would cut to 2.9 billion euros ($3.4 billion) the cash portion of a 5.5 billion euro special dividend shareholders will receive under the terms of the accord signed last year.
“It was a courageous and realistic move by management given the need to hang on to liquidity,” said Roberto Lottici, fund manager at Banca Ifigest in Milan.
FCA and PSA said estimated annual synergies from the creation of Stellantis will rise to more than 5 billion euros from the previously estimated 3.7 billion euros.
One-off costs of achieving these will also increase to 4 billion euros from an initial 2.8 billion euros, they said.
Some believed a change in the terms of the merger between the two companies was inevitable given fallout from the coronavirus pandemic.
“… it was therefore important to recalibrate the terms of the agreement which had become unfavourable to the shareholders of the French company,” said Gregoire Laverne, fund manager at Paris-based APICIL Asset Management, which owns PSA shares.
The groups said that Stellantis would now have an extra 2.6 billion euros in cash and, in light of the companies’ performance and market conditions, they would consider distributing 500 million euros to the shareholders of each company before the closing, or 1 billion euros after the closing.
Reporting by Giulia Segreti in Rome, Giancarlo Navach and Stephen Jewkes in Milan, Sudip Kar-Gupta in Paris; Editing by Kirsten Donovan