Author Topic: FCAU - Fiat Chrysler Automobiles  (Read 892337 times)

Gray Fox

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2890 on: March 19, 2019, 04:59:39 PM »
PSA wants a merger with ALL of FCAU.  Europe is a structurally worse market for autos than North America.  Way more restrictive labor rules, fuel standards, and less demand for higher margin SUVs/pick up trucks.  Fiat's fleet business is slightly profitable and their regular Fiat business loses a little money.  Combined it does 1.4mm units, the vast majority of which are in Europe.  PSA could buy this and synergies might be 1%-1.5% of sales. 

Getting Fiat off the main entity essentially means losing very little profits, a significant amount of CapEx, the most troublesome unions/governments, and puts Jeep/Ram in focus.  It also makes it that much more likely they file GAAP financials.  If FCAU were in the index today, it would be a 10bps position in every index fund based on its market cap.  1.555mm shares, 1.1mm of which are free floating.  At current trading volumes it would take quite a long time for them to get a full position - it would provide a nonstop bid and could potentially close the valuation gap with F/GM.

There is parent level debt at Exor.  They are doing the dividends right now to delever Exor.  If they could actually sell the Fiat line to PSA it would be a home run.  PSA wants to do a deal with the whole company because they want to diversify away from Europe.  GM Europe was a far worse business and they essentially got it for free.  Is the FIat line at 1.4mm units worth a couple billion Euro? The synergies alone at PSAs current multiple imply that it is.



Parsad

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2891 on: March 19, 2019, 05:35:13 PM »
PSA wants a merger with ALL of FCAU.  Europe is a structurally worse market for autos than North America.  Way more restrictive labor rules, fuel standards, and less demand for higher margin SUVs/pick up trucks.  Fiat's fleet business is slightly profitable and their regular Fiat business loses a little money.  Combined it does 1.4mm units, the vast majority of which are in Europe.  PSA could buy this and synergies might be 1%-1.5% of sales. 

Getting Fiat off the main entity essentially means losing very little profits, a significant amount of CapEx, the most troublesome unions/governments, and puts Jeep/Ram in focus.  It also makes it that much more likely they file GAAP financials.  If FCAU were in the index today, it would be a 10bps position in every index fund based on its market cap.  1.555mm shares, 1.1mm of which are free floating.  At current trading volumes it would take quite a long time for them to get a full position - it would provide a nonstop bid and could potentially close the valuation gap with F/GM.

There is parent level debt at Exor.  They are doing the dividends right now to delever Exor.  If they could actually sell the Fiat line to PSA it would be a home run.  PSA wants to do a deal with the whole company because they want to diversify away from Europe.  GM Europe was a far worse business and they essentially got it for free.  Is the FIat line at 1.4mm units worth a couple billion Euro? The synergies alone at PSAs current multiple imply that it is.

I agree with you on all counts.  I would also suggest that any interest (whether in part or whole) for FCAU, means that a competing offer could also come.  FCAU is probably one of the best smaller auto companies available for consolidation, especially with all of the cash, low debt and strong U.S. cash flows.  I was off on my timing about a deal getting done before December...but I wouldn't at all be surprised if something happens before July.  Cheers!
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Spekulatius

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2892 on: March 19, 2019, 06:08:13 PM »
PSA wants a merger with ALL of FCAU.  Europe is a structurally worse market for autos than North America.  Way more restrictive labor rules, fuel standards, and less demand for higher margin SUVs/pick up trucks.  Fiat's fleet business is slightly profitable and their regular Fiat business loses a little money.  Combined it does 1.4mm units, the vast majority of which are in Europe.  PSA could buy this and synergies might be 1%-1.5% of sales. 

Getting Fiat off the main entity essentially means losing very little profits, a significant amount of CapEx, the most troublesome unions/governments, and puts Jeep/Ram in focus.  It also makes it that much more likely they file GAAP financials.  If FCAU were in the index today, it would be a 10bps position in every index fund based on its market cap.  1.555mm shares, 1.1mm of which are free floating.  At current trading volumes it would take quite a long time for them to get a full position - it would provide a nonstop bid and could potentially close the valuation gap with F/GM.

There is parent level debt at Exor.  They are doing the dividends right now to delever Exor.  If they could actually sell the Fiat line to PSA it would be a home run.  PSA wants to do a deal with the whole company because they want to diversify away from Europe.  GM Europe was a far worse business and they essentially got it for free.  Is the FIat line at 1.4mm units worth a couple billion Euro? The synergies alone at PSAs current multiple imply that it is.

I agree with you on all counts.  I would also suggest that any interest (whether in part or whole) for FCAU, means that a competing offer could also come.  FCAU is probably one of the best smaller auto companies available for consolidation, especially with all of the cash, low debt and strong U.S. cash flows.  I was off on my timing about a deal getting done before December...but I wouldn't at all be surprised if something happens before July.  Cheers!

Can Peugeot even do a purchase of the whole company for cash? If itís for shares then they probably sell off on style and the premium would be small, because Peugeot trades cheaply to begin with.

I would sort of like them to take the Fiat operation, even if they pay very little or zero, because I donít think itís worth anything. Machione could fix Chrysler, but he couldnít fix Fiat in a 10 year economic recovery and Italy (Fiat strongest market) is falling into a recession and is unlikely to get any better.
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Parsad

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2893 on: March 19, 2019, 06:15:57 PM »
PSA wants a merger with ALL of FCAU.  Europe is a structurally worse market for autos than North America.  Way more restrictive labor rules, fuel standards, and less demand for higher margin SUVs/pick up trucks.  Fiat's fleet business is slightly profitable and their regular Fiat business loses a little money.  Combined it does 1.4mm units, the vast majority of which are in Europe.  PSA could buy this and synergies might be 1%-1.5% of sales. 

Getting Fiat off the main entity essentially means losing very little profits, a significant amount of CapEx, the most troublesome unions/governments, and puts Jeep/Ram in focus.  It also makes it that much more likely they file GAAP financials.  If FCAU were in the index today, it would be a 10bps position in every index fund based on its market cap.  1.555mm shares, 1.1mm of which are free floating.  At current trading volumes it would take quite a long time for them to get a full position - it would provide a nonstop bid and could potentially close the valuation gap with F/GM.

There is parent level debt at Exor.  They are doing the dividends right now to delever Exor.  If they could actually sell the Fiat line to PSA it would be a home run.  PSA wants to do a deal with the whole company because they want to diversify away from Europe.  GM Europe was a far worse business and they essentially got it for free.  Is the FIat line at 1.4mm units worth a couple billion Euro? The synergies alone at PSAs current multiple imply that it is.

I agree with you on all counts.  I would also suggest that any interest (whether in part or whole) for FCAU, means that a competing offer could also come.  FCAU is probably one of the best smaller auto companies available for consolidation, especially with all of the cash, low debt and strong U.S. cash flows.  I was off on my timing about a deal getting done before December...but I wouldn't at all be surprised if something happens before July.  Cheers!

Can Peugeot even do a purchase of the whole company for cash? If itís for shares then they probably sell off on style and the premium would be small, because Peugeot trades cheaply to begin with.

I would sort of like them to take the Fiat operation, even if they pay very little or zero, because I donít think itís worth anything. Machione could fix Chrysler, but he couldnít fix Fiat in a 10 year economic recovery and Italy (Fiat strongest market) is falling into a recession and is unlikely to get any better.

They could do a leveraged deal for the whole thing.  After you pay the one-time dividend, and the special dividend from Magnetti, there is still $4-5B left from the deal which was going into research and development.  FCAU is also sitting on a ton of cash.  So they could do a leveraged deal for cash after borrowing about $10-13B...I don't think a stock deal would get done or approved by Elkann unless there was like a 80-100% premium to the current price.  But they could probably do a leveraged cash deal for a 40-50% premium now.  Cheers!
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Gray Fox

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Re: FCAU - Fiat Chrysler Automobiles
« Reply #2894 on: Today at 04:46:28 AM »
I have some $20 LEAPs ( in addition to $15/$17) at this point so I'm hoping its at least 35% or so premium...