EU watchdog raises new concerns on FCA-PSA £39.52 billion merger

In an announcement on Monday, EU watchdog raised new concerns about a potential merger between Fiat Chrysler Automobiles (BIT: FCA) and French automotive manufacturer, Groupe PSA (EPA: UG). In the market for small vans, the antitrust regulator said, the merged company is expected to have a huge share. The watchdog is now seeking concessions before it approves the £39.52 billion agreement between the two companies.   

FCA and PSA merger is likely to mark the world’s 4^th largest auto manufacturer. Shares of FCA are currently 2.5% up on Monday. At £8.55 per share, the Italian carmaker is roughly 30% down year to date in the stock market after recovering from a low of £5.18 per share in March. FCA is currently valued at £13.24 billion and has a price to earnings ratio of 3.49. Learn more about value investing strategy.

FCA and PSA have two days to respond to EU Commissions’ concerns

According to the sources, if the two companies fail to address the concerns raised by the European Commission and offer concessions in the next 2 days, a full-scale investigation that will last for about four months will be launched into the merger agreement. FCA is also in the process of receiving £5.65 billion financial support from the government.

The EU antitrust regulator is committed to ensuring fair competition following the FCA-PSA merger. For its preliminary review, the watchdog has set a deadline of 17^th June. The EU commission refused to make an official statement on the news on Monday. FCA and PSA are yet to comment on the report as well. In a recent announcement, Mitie also said that it has extended its contract with PSA by £5.2 million.

The merger was originally aimed at helping the two carmakers in coping with falling demand that worsened significantly due to the Coronavirus pandemic that has so far infected more than 7.1 million people worldwide and caused over 400,000 deaths. Joining the resources will also help FCA and PSA to share the financial burden of manufacturing cars that meet the recently revised, stricter emissions regulations.

Groupe PSA is 25% down year to date in the stock market

Following the completion of the transaction, a range of prominent car brands including Italian Fiat, Dodge, Jeep, Maserati, Ram, and French Peugeot, DS, and Opel, will be brought to the same platform.

Shares of Groupe PSA are currently about 5% up on Monday. At £14.40 per share, the French carmaker is roughly 25% down year to date in the stock market after recovering from a low of £8.53 per share in March.

At the time of writing, PSA has a market cap of £13.03 billion and a price to earnings ratio of 4.75.