PARIS -- PSA Group and Fiat Chrysler Automobiles have revised the terms of their planned merger to conserve cash during the coronavirus pandemic.
PSA will hold onto its stake in parts supplier Faurecia and FCA will cut the cash portion of a 5.5 billion euro ($6.5 billion) special dividend.
Once combined, the new company will be called Stellantis.
“With this new decisive milestone, we are moving all together towards our goal in the best possible condition with even greater prospects for Stellantis," PSA CEO Carlos Tavares said in a statement on Monday. "I would like to take this opportunity to warmly thank the teams who have built reciprocal relations of trust, including during the COVID-19 confinement."
FCA will cut to 2.9 billion euros ($3.44 billion) the cash portion of a special dividend its shareholders are set to receive under the terms of the merger accord, the statement said.
PSA, in turn, will scrap the spin-off of its 46 percent stake in Faurecia. The supplier was capitalized at 5.9 billion euros ($7 billion) at Monday's market closing, the companies said.
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 of the merger, or 1 billion euros after.
FCA and PSA said annual estimated synergies from their merger were now seen over 5 billion euros, compared with an initial estimate of over 3.7 billion euros.
The two automakers confirmed that they expected to complete their tie-up process by the end of first quarter of next year.
Faurecia, which makes a wide variety of interiors and other parts for automakers, ranks No. 8 on the Automotive News Europe list of the top 100 global suppliers with worldwide sales to automakers of $19.9 billion in 2019.
Based on Stellantis' 50-50 ownership structure, FCA and PSA respective shareholders will each receive a 23 percent stake in Faurecia.
Analysts welcomed the 2.6 billion euros in additional liquidity for Stellantis' balance sheet as well as the increase in projected synergies.
"All told, the two players emerge as winners," broker ODDO BHF said in a note.
"Of the two, FCA might be a bit more of a winner in the short term given the structure of the deal and the numerous payouts to shareholders to come in the quarters ahead (potentially close to 5 billion euros versus the current capitalization of around 16 billion euros)," ODDO BHF said.
Jefferies analyst Philippe Houchois said the changes are “neutral in theory” but on balance “are skewed to PSA" because the reduced distributions accrue to the combined company’s balance sheet.
“FCA’s shareholders are now assuming some market risk on Faurecia shares,” Houchois said in a note.
Analysts had argued that the 5.5 billion euro payout to FCA shareholders, led by controlling investor EXOR, the holding company of Italy's Agnelli family, could weaken the new automaker's finances, as the auto industry was paying a high price for the coronavirus outbreak this year.
The special dividend for FCA shareholders also proved contentious after Italy offered state guarantees for a 6.3 billion euro loan to the company's Italian business.
"These announcements should, at last, end the debate over the financial terms of the merger, which had become a big topic and was still penalizing the two groups' share performances," ODDO BHF said.
FCA and PSA said the amendments preserve the balance of original combination agreement.
A source said on Monday that the aim of the changes was to reinforce the balance-sheet structure of both companies after the COVID-19 crisis and ensure that the merger plan is concluded as soon as possible.
Both automakers earlier this year scrapped dividend payments on 2019 results, each worth 1.1 billion euros.
Reuters and Bloomberg contributed to this report.