Fiat Chrysler's John Elkann Nears Crowning Achievement With PSA Merger

By Eric Sylvers

MILAN -- John Elkann inherited the leadership of Italy's most famous industrial family as a soft-spoken 28-year-old with limited work experience and facing the immediate task of saving a nearly bankrupt Fiat.

Now, more than 16 years later, Mr. Elkann stands on the cusp of completing the merger of Fiat Chrysler Automobiles NV and Peugeot maker PSA Group. The deal, which is expected to create the world's third-largest car maker by vehicle sales, seals Mr. Elkann's legacy and ends his family's centurylong undisputed control of the Italian-American car maker and the company's previous incarnations.

Shareholders of both companies are set to approve the merger on Monday, and the closing could come as soon as later this month, according to people familiar with the situation. The new company will be called Stellantis, which incorporates a Latin word meaning "to brighten with stars," and will present Mr. Elkann with new challenges, including managing relations among major shareholders.

Mr. Elkann, who is Fiat Chrysler's chairman and will take the same position at Stellantis, has become an adroit deal maker since rising to the top of the family in 2004. Though his transformation from a recent college graduate who rarely spoke in public to a key figure behind the largest car-industry deal in decades hasn't come without hiccups.

The grandson of Gianni Agnelli and the fifth generation of the dynasty that had a hand in founding Fiat in 1899, Mr. Elkann negotiated a previously planned merger with Renault SA. He then pulled the plug after deciding the French state, a Renault shareholder, was too unwieldy a partner.

Mr. Elkann had maintained relations with the Peugeot family, a large PSA investor, even as he prepared to merge Fiat Chrysler with Renault, their rival. Mr. Elkann personally delivered the news of that merger to Robert Peugeot, who heads his family's investment firm, according to people familiar with their discussion. That personal touch helped smooth the way for Mr. Elkann when he got back in touch with Mr. Peugeot after the Renault deal fell apart, the people said.

Mr. Elkann declined to comment for this article.

While the coronavirus pandemic scuttled or delayed other previously announced deals, Mr. Elkann kept the merger on track. He personally negotiated adjustments that cut the cash dividend to be paid to Fiat Chrysler shareholders while guaranteeing a similar total payout over the longer term, said a person familiar with the negotiations.

Mr. Elkann's emergence as a deal maker has run parallel with his increasing ability to corral the more than 100 members of his extended family. Together they own 53% of Exor, the holding company that gives them a 29% share of Fiat Chrysler and controlling stakes in Ferrari NV, Italian soccer team Juventus, the Economist Group and other assets.

Exor's rich dividend payments and an average annual gain of 25% in the company's share price over the past decade have helped Mr. Elkann win the support of his family. He also built cohesion among his cousins through family rituals, including a yearly soccer game and dinner, according to several Agnelli family members.

Exor's board includes Mr. Elkann, his sister and just two other family members, so he holds periodic meetings attended by representatives of the family's nine main branches. While no decisions are taken at those meetings, family members say they appreciate the get-togethers as a way for them to keep abreast of developments beyond what they read in the newspapers.

As chairman of Stellantis, Mr. Elkann will likely have to navigate rocky relations with Italian unions and the government in Rome. Fiat Chrysler has butted heads with both in recent years. While the merger has generally been cheered in Italy, there is angst among workers who fear for the long-term viability of Fiat Chrysler's underused Italian factories.

Carlos Tavares, PSA's chief executive who will hold the same title at Stellantis, is expected by company observers to spend much of his time in Paris, further shifting the company's center of gravity north of the Alps. Fiat Chrysler is registered in the Netherlands, has its tax domicile in the U.K. and makes almost all of its profit from the North American business.

Mr. Elkann has defied some prognosticators who said he would eventually sell all or part of Exor's stake in Fiat Chrysler to invest in faster-growing businesses.

Mr. Tavares will take the wheel of Stellantis once the deal closes, but Mr. Elkann will be called upon to help navigate the disparate interests of the new company's array of large investors, which will include Exor, the Peugeot family and the French government.

"Elkann will have to shift from deal maker to the role of mediator," said Giovanni Favero, a professor in the management department at Ca' Foscari University in Venice. "The American, Italian and French interests will try to pull the company in different directions."

Mr. Elkann, who speaks English, Italian, French and Portuguese, has steered through difficult waters in the past, including when he became leader of the family. The company had lost almost EUR6 billion, equivalent to $7.3 billion, and cycled through four CEOs in the two years before he took over in 2004, and the most likely prospect for the troubled car maker at that time looked to be bankruptcy or a takeover by a group of banks holding billions of euros in debt convertible into Fiat shares.

Mr. Elkann immediately hired Sergio Marchionne as CEO, a move that changed his family's fortunes. As Mr. Marchionne righted the listing Fiat, Mr. Elkann began to learn from the executive, who would become his mentor and close friend.

In the 2 1/2 years since Mr. Marchionne's death, Mr. Elkann has taken more of a leadership role. The mild-mannered Mr. Elkann doesn't tend to raise his voice in public, denigrate competitors or browbeat journalists -- as the swashbuckling Mr. Marchionne tended to -- but those who know him attribute his doggedness in searching for a partner to merge with Fiat Chrysler to the influence of the CEO he hired when he was 28.

While Mr. Elkann has had success with some of his recent investments, in particular the 2015 takeover of reinsurer PartnerRe, most of the surge in Exor's share price over the past decade can be traced to Mr. Marchionne's managerial and financial acumen. The pressure is on Mr. Elkann to keep that going.

Throughout his professional career, he has helped his chances by surrounding himself with experienced people. He knows Warren Buffett and regularly attends Berkshire Hathaway's annual meeting in Omaha, Neb. Mr. Elkann bought PartnerRe after consulting with Ajit Jain, Berkshire's vice chairman of insurance operations and a possible successor to Mr. Buffett.

Exor's Partners Council, which advises company executives, is chaired by George Osborne, a former U.K. Treasury chief, and recently added to its ranks Daniel Ek, founder of Spotify Technology S.A., as well as Ruth Porat, chief financial officer at Google parent Alphabet Inc.

When Mr. Elkann set up a fund within Exor to invest in startups, he tapped some of Silicon Valley's most famous investors for advice. And, when he decided to buy majority control of a Chinese fashion company last month, he invested alongside French fashion giant Hermès International SA.

Write to Eric Sylvers at [e-mail]

(END) Dow Jones Newswires

01-03-21 1214ET