By Ben Dummett
Fiat Chrysler Automobiles NV and Peugeot maker PSA Group canceled dividend payments they promised their shareholders that were part of a broader agreement to merge, but said the deal remains on track.
Both companies had previously warned their annual dividends for 2019 were under review amid an industrywide scramble to raise and save cash to weather the coronavirus pandemic. The planned dividend, amounting to EUR1.1 billion ($1.2 billion) for each company, was an important component in the merger deal.
In a release issued late Wednesday night, Fiat and Peugeot said they remained on track to complete the planned multibillion-dollar tie-up before the end of March 2021. Merger preparations "are advancing well, including with respect to antitrust and other regulatory filings," the car makers said in a joint statement.
Still, the dividend cancellation highlights the pressure both companies are under to push the complex deal through amid tumult in the global car industry and the world's stock markets. The pact, agreed to late last year, was structured mostly as a stock swap. But it also included two sets of cash payouts designed, in part, to equalize valuations between the two companies and achieve a so-called merger of equals.
The deal is a bet that a combination would give the two greater financial heft and broader geographic reach to better equip them to manage the high costs of investing in autonomous and electric vehicles. Executives at both companies think that strategic rationale is even stronger amid the pandemic, people familiar with the matter have said.
Fiat Chrysler is still on the hook to distribute a separate EUR5.5 billion dividend to its shareholders as part of the merger deal.
Fiat Chrysler shares were down 1.7% in Europe trading, while Peugeot shares were 3.4% lower.
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