Fiat Chrysler’s John Elkann nears crowning achievement with PSA merger

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

Mr. Elkann, Chairman of Fiat Chrysler who will hold the same position at Stellantis, has become a nimble deal maker since rising to the top of the family in 2004. While his transformation from a recent graduate who rarely spoke publicly to a key figure behind the biggest deal in the auto industry in decades hasn’t come without a hitch.

The grandson of Gianni Agnelli and the fifth generation of the dynasty who helped found Fiat in 1899, Mr. Elkann negotiated a previously planned merger with Renault. TO

. He then pulled the plug after deciding that the French state, a shareholder of Renault, was too unwieldy a partner.

Mr. Elkann had maintained relationships with the Peugeot family, a major investor in PSA, even as he prepared to merge Fiat Chrysler with Renault, their rival. Mr. Elkann personally conveyed the news of that merger to Robert Peugeot, who heads his family’s investment company, according to people familiar with their discussion. That personal approach helped smooth the way for Mr Elkann when he got back in touch with Mr Peugeot after the Renault deal fell apart, people said.

Mr. Elkann declined to comment on this article.

While the coronavirus pandemic sunk or delayed other previously announced deals, Mr. Elkann kept the merger on track. He personally negotiated adjustments that would lower the cash dividend to be paid out to Fiat Chrysler shareholders while ensuring a similar total payout over the longer term, a person familiar with the negotiations said.

Mr. Elkann’s rise as a deal maker parallels his growing ability to bring together the more than 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 Ferrari NV, the Italian soccer team Juventus, the Economist Group and other assets.

Exor’s rich dividend payments and an average annual gain of 25% in the company’s stock price over the past decade have helped Mr. Elkann win the support of his family. According to several of Agnelli’s relatives, he also built cohesion among his cousins ​​through family rituals, including an annual football game and dinner.

The exor’s board consists of Mr. Elkann, his sister, and only two other family members, so he regularly holds meetings attended by representatives of the nine main branches of the family. While no decisions are made during those meetings, family members say they value the meetings as a way for them to keep abreast of developments beyond what they read in the newspapers.

As Chairman of Stellantis, Mr. Elkann likely had to maintain difficult relations with Italian unions and the government in Rome. Fiat Chrysler has hit both heads in recent years. While the merger has been generally welcomed in Italy, there is fear among workers who fear the long-term viability of Fiat Chrysler’s underused Italian factories.

Carlos Tavares, PSA’s CEO who will retain the same title at Stellantis, is expected by company observers to spend much of his time in Paris, further shifting the company’s center of gravity north of the Alps. Fiat Chrysler is registered in the Netherlands, is resident for tax purposes in the UK and derives almost all of its profits from its North American operations.

Mr. Elkann has defied some forecasters who said he would eventually sell all or part of Exor’s stake in Fiat Chrysler to invest in faster growing companies.

Mr. Tavares will take over the wheel of Stellantis once the deal is closed, but Mr. Elkann will be called upon to help navigate the diverse interests of the new company’s range of major investors, including Exor, the Peugeot family and the French government.

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

Speaking English, Italian, French and Portuguese, Mr. Elkann has navigated troubled waters in the past, including when he became the family leader. The company had lost nearly € 6 billion, which equates to $ 7.3 billion, and cycled past four CEOs in the two years before taking over in 2004, and the most likely prospect for the troubled carmaker at the time seemed bankruptcy or bankruptcy. to be an acquisition. by a group of banks with billions of euros in debt that can be converted into Fiat shares.

Mr. Elkann immediately hired Sergio Marchionne as CEO, a move that changed his family’s fortunes. When Mr. Marchionne re-listed Fiat, Mr. Elkann began to learn about the executive, who would become his mentor and close friend.

In the 2.5 years since Mr. Marchionne’s death, Mr. Elkann has taken on more of a leadership role. Gentle Mr. Elkann has no tendency to raise his voice in public, belittle competitors or rash journalists – as the reckless Mr. Marchionne did – but those who know him attribute his persistence in seeking a partner Fiat to merge. Chrysler under the influence of the CEO he hired when he was 28.

While Mr. Elkann has had success with some of his recent investments, most notably the 2015 acquisition of reinsurer PartnerRe, the rise in Exor’s share price over the past decade has largely been traced back to the management and financial insight of the company. Mr. Marchionne. The pressure is on Mr. Elkann to keep that going.

Throughout his professional career, he has increased his opportunities by surrounding himself with experienced people. He knows Warren Buffett and goes to Berkshire Hathaway regularly‘s

annual meeting in Omaha, Neb. Mr. Elkann bought PartnerRe after consulting Ajit Jain, Berkshire’s vice chairman of insurance operations and a possible successor to Mr. Buffett.

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

When Mr. Elkann set up a fund within Exor to invest in startups, he called on some of Silicon Valley’s most famous investors for advice. And when he decided to buy a majority stake in a Chinese fashion company last month, he invested together with French fashion giant Hermès International TO

.

Write to Eric Sylvers at [email protected]