FCA-PSA deal shows a merger of equals

Bloomberg

Fiat Chrysler Automobiles NV and PSA Group went out of their way to make their combination as equal as possible, shedding assets, paying special dividends and distributing board seats. It didn’t take long for investors to figure out who the buyer is.
Shares of Fiat Chrysler jumped 10% after the two sides announced the deal, billed as a 50-50 merger. Peugeot owner PSA fell by about the same amount, taking the typical acquirer’s hit.
The math bears it out. Fiat shareholders will get a premium of almost 5 billion euros ($5.6 billion), based on closing prices, before reports of the talks, as both sides shed assets before throwing their remaining equity into the pot.
Adjusting for the differences in market values and a 5.5 billion-euro dividend being paid out to Fiat Chrysler shareholders, “achieving a 50/50 shareholding suggests PSA is paying a 32% premium to assume control of FCA,” Jefferies analyst Philippe Houchois said in a note. “PSA shareholders are assuming more market risk.”
Representatives of Fiat and PSA declined to comment.
PSA had a market value of 22.6 billion euros. Before it merges with Fiat, it’ll hand shareholders its almost 3 billion-euro stake in French parts maker Faurecia SE, leaving about 19.6 billion euros to be contributed to the new company.
Fiat shareholders will throw in at least 5 billion euros less. The Italian-American company had a market value of 20 billion euros. But before the deal closes,the carmaker will jettison about 5.75bn euros.