Fiat Chrysler’s John Elkann on the verge of success with PSA merger

Shareholders of both companies are expected to approve the merger on Monday, and the close could come as early as later this month, according to people familiar with the situation. The new company will be called Stellantis, which incorporates a Latin word meaning “brighten up the stars”, and will present Mr. Elkann with new challenges, including managing relationships between major shareholders.

Mr. Elkann, who is chairman of Fiat Chrysler and will hold the same position at Stellantis, has become a skilled negotiator since he rose to the top of the family in 2004. Although his transformation from a recent college graduate who rarely spoke in public at a The key figure behind the auto industry’s biggest deal in decades hasn’t come without hiccups.

Grandson of Gianni Agnelli and the fifth generation of the dynasty that helped found Fiat in 1899, Mr. Elkann negotiated an already planned merger with Renault AT

. He then withdrew the plug after deciding that the French state, a Renault shareholder, was too heavy a partner.

Mr. Elkann had maintained relations with the Peugeot family, a major investor in PSA, even as he was preparing to merge Fiat Chrysler with Renault, their rival. Mr Elkann personally broke the news of the 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 reconnected with Mr Peugeot after the Renault deal broke, 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 reduce the cash dividend payable to Fiat Chrysler shareholders while ensuring a similar total payout over the longer term, a person familiar with the negotiations said.

Mr Elkann’s emergence as a negotiator has paralleled his growing ability to bring together over 100 members of his extended family. Together they own 53% of Exor, the holding company that gives them a 29% stake in Fiat Chrysler and controls stakes in Ferrari NV, Italian football team Juventus, The Economist Group and other assets.

Exor’s rich dividend payouts and an average 25% annual gain in the company’s stock price over the past decade have helped Mr. Elkann gain the support of his family. He also strengthened the cohesion between his cousins ​​through family rituals, including an annual football game and dinner, according to several members of the Agnelli family.

Exor’s board of directors consists of Mr. Elkann, his sister, and only two other family members, so it holds periodic meetings with representatives from the nine main branches of the family. While no decisions are made at these meetings, family members say they value the meetings as a way for them to keep abreast of developments beyond what they read in the papers.

As president of Stellantis, Mr. Elkann will likely have to navigate difficult relations with the Italian unions and the government in Rome. Fiat Chrysler has run into both in recent years. While the merger has generally been applauded in Italy, workers fear for the long-term viability of Fiat Chrysler’s underutilized Italian factories.

Carlos Tavares, CEO of PSA who will hold the same title at Stellantis, is expected to spend much of his time in Paris, according to company observers, shifting the company’s center of gravity further north of the Alps. Fiat Chrysler is registered in the Netherlands, has its tax domicile in the United Kingdom and derives almost all of its profits from the North American business.

Mr Elkann has defied some prognosticators who said he would end up selling all or part of Exor’s stake in Fiat Chrysler to invest in faster growing companies.

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

“Elkann will have to move from the status of deal maker to the role of mediator,” said Giovanni Favero, professor in the management department at Ca ‘Foscari University in Venice. “American, Italian and French interests will try to pull the company in different directions.”

Mr. Elkann, who speaks English, Italian, French and Portuguese, has lived through difficult waters in the past, especially when he became the head of the family. The company had lost nearly 6 billion euros, or $ 7.3 billion, and had gone through four CEOs in the two years before he took office in 2004, and the most likely prospect for the automaker in difficulty at the time seemed to be bankruptcy or a takeover. by a group of banks holding billions of euros of debt convertible into Fiat shares.

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

In the two and a half years since Mr. Marchionne’s death, Mr. Elkann has taken on more of a leadership role. The mild-mannered Mr. Elkann doesn’t tend to raise his voice in public, belittling competitors or browbeat journalists – as Mr. Marchionne’s swagger did – but those who know him attribute his relentlessness to research. a partner to merge with Fiat Chrysler to the influence of the CEO he hired at the age of 28.

While Mr. Elkann has had some success with some of his recent investments, particularly the takeover of reinsurer PartnerRe in 2015, most of the surge in Exor share prices over the past decade can be attributed to within the meaning of the management and finances of Mr. Marchionne. The pressure is on Mr. Elkann to keep this going.

Throughout his professional career, he contributed to his chances by surrounding himself with experienced people. He knows Warren Buffett and frequents Berkshire Hathaway regularlyof

annual meeting in Omaha, Neb. Mr Elkann bought PartnerRe after consulting with Ajit Jain, vice president of insurance operations at Berkshire and possible successor to Mr Buffett.

Exor’s Council of Partners, which advises company executives, is chaired by George Osborne, former Director of the UK Treasury, and recently added Daniel Ek, founder of Spotify Technology SA, as well as Ruth Porat, to its ranks, chief financial officer of the parent company of Google Alphabet Inc.

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

.

Write to Eric Sylvers at [email protected]