(BFM Bourse) – The automotive group resulting from the merger of Fiat Chrysler and PSA will buy back less than 70 million shares acquired by its competitor in Detroit through the use of stock warrants. This allows it to avoid dilution and send a positive signal to its shareholders.
Stellantis settled a file that remained pending until then. And that could bring a competitor, the American General Motors, to be one of its reference shareholders.
When PSA – which married Fiat Chrysler in January 2021 to give birth to Stellantis – bought German Opel from General Motors in 2017, the Sochaux group paid the American company both in cash and in derivative products. . billion euros. PSA then issued 39.7 million stock warrants (BSAs) based on one share per BSA.
General Motors can exercise these BSAs between the fifth and ninth year after the date of issue, i.e. between July 25, 2022 and July 25, 2026.
So Stellantis did not take long to arrive. The car manufacturer with 14 brands (the 14 “constellations” of the group whose name comes from the Latin stello meaning “constellation” or “shining with the stars”) announced overnight from Tuesday to Wednesday that it has signed an agreement to purchase a total of 69.1 million of its ordinary shares – ie 2.2% of the total capital – that General Motors has the right to subscribe by exercising its 2017 warrants (with the parity adopted during the merger of 1.742 shares of Stellantis for one share of PSA) .
A total cost of more than 920 million euros
Stellantis will pay 923.25 million euros to resolve this link with General Motors, which is to exercise its options and redeem its shares in the process. The group determined that this amount was based on the “average volume-weighted average price per ordinary share of Stellantis on the Euronext Milan market over the last five trading days”.
Stellantis will also deliver to General Motors a cash payment of 130 million euros and 1.2 million ordinary shares in automotive supplier Faurecia, which together represent the dividend rights of PSA and Stellantis.
As a reminder, Stellantis paid almost all of Faurecia’s 39.3% stake to its shareholders in the form of a stock dividend after its birth. However, the group retains a 0.8% stake that is directly linked to General Motors’ warrants.
An important signal
By buying back shares of General Motors, Stellantis avoided having a competitor in its capital, which is not unusual. For example, Renault has long counted the German Daimler (now Mercedes-Benz) among its major shareholders.
But the manufacturer above all sends a positive message to its shareholders. “Stellantis has been faced for several months with the weakness of its valuation, which its management is now trying to improve. With this in mind, the group has already indicated that it will carry out an accretion policy”, recalls Jean-Louis Sempé, analyst at Invest Securities.
“It is because of this desire that this announcement should be understood: Stellantis avoided the dilution that could have caused the use of BSAs in General Motors”, explained the analyst. “This is a good signal that proves that the car group is well engaged in this policy of denying the title”, he concluded.
A “mysterious” valuation
On the Paris Stock Exchange, Stellantis shares performed well after these announcements, gaining 0.8% to 13.67 euros, while the CAC 40 stagnated.
The fact remains that the group’s valuation remains depreciated relative to its sparkling fundamentals. The carmaker led by Carlos Tavares posted a current operating margin of more than 14% in the first quarter, while Volkswagen’s profit was 9.8% in the same period and General Motors’ 8.9%. earnings versus 5.6 times for Volkswagen and 7.6 times for General Motors.
“The discount to peer valuation remains a mystery, given the quality of execution, including superior cash generation and conversion,” Jefferies said in a recent note.
Julien Marion – ©2022 BFM Bourse