Fiat Chrysler Automobiles ("FIAT")
We initiated a position in FIAT back in late 2018 since it was a cheap stock with good amounts of cash. It caught our attention when the controlling shareholders wanted to unlock value either by paying special dividends, buybacks of shares or through strategic merger and acquisition. Since our purchase in December 2018, we have received US$2.70 in regular and special dividends, accounting for over 30% of the original price paid. We expect the regular and special dividend payments to continue once the COVID-19 crisis abates.
After much anticipation, the merger between Fiat and Peugeot S.A. was finally completed on January 16, 2021. The new company is called Stellantis N.V. (STLA, Financial) ("Stellantis").
We are excited with the merger, as it is of the reasons why we initially invested in Fiat – capital allocation skills of the executives. We liked what the CEO of Stellantis said in a recent interview, "I don't know what the valuation will be, but I can tell you that we are not going to be a legacy carmaker cornered in legacy products… We want to have a good result in 2021. We have also put a strong focus and a strong monitoring on the synergy plan. This is our commitment to you.
We created this merger because it represents north of EUR 25 billion of value creation through the implementation of the synergies that were presented, which represents on a run rate EUR 5 billion per year. So we have a very detailed plan that we follow up with a specific dedicated team that we call the Synergy Implementation Office. So every decision we make is facing the synergy that is expected from that decision, and we are continuously trying to improve and make sure that we deliver on our commitments, and we will."
In other words, they are going to have cost savings of EUR 5 billion a year for a total of EUR 25 billion in 5 years. The market capitalization of Stellantis is currently at EUR 46 billion, with much room for upside if some of those cost savings come to pass.
From Francis Chou (Trades, Portfolio)'s Chou Europe Fund 2020 annual shareholder letter.
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