Fiat Chrysler (FCA) and PSA Group, the Peugeot maker, have announced they will merge. The deal will create a $50 billion car giant – the fourth largest in the world. According to the official announcement, the companies “agreed to merge 50-50 between them”.
The two boards of directors have approved negotiating teams to summarize the final details of the merger.
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Through the merger, the two giants will be able to share the cost of developing electric and autonomous cars. Their joint purchasing power will allow them to save money. “The combined entity”, the statement said, “would leverage its strong global R&D footprint and ecosystem to foster innovation and meet challenges in connected, electrified, shared and autonomous mobility, with speed, and capital efficiency.”
By the time the deal is completed, Fiat Chrysler will pay shareholders € 5.5 billion in a special dividend, giving them shares in the subsidiary Comeau, which deals with robotic systems. In addition, Peugeot will give its shareholders 46% of the spare parts manufacturer Faurecia.
The 4th largest global OEM will sale 8.7 million vehicles, with combined revenues of nearly €170 billion1 and recurring operating profit of over €11 billion on a simple aggregated basis of 2018 results excluding Magneti Marelli and Faurecia.
The significant value accretion resulting from the transaction is estimated to be approximately €3.7 billion in annual run-rate synergies derived principally from more efficient activity.
It is projected that 80% of the synergies would be achieved after 4 years. The total one-time cost of achieving the synergies is estimated at €2.8 billion.
Fiat Chrysler, or FCA Group, headquarters is in Amsterdam, while Groupe PSA is based in Paris. The merged company, to be based in the Netherlands, will own the Fiat, Chrysler, Maserati, Dodge, Alfa Romeo, Ram, Peugeot, DS, Citroën, Opel and Vauxhall brands. It will be listed in New York, Paris, and Milan.
The proposed merger comes several months after Fiat abandoned a merger proposal with rival Peugeot – French Renault. The deal collapsed after Fiat failed to win backing from the French government, which owns many Renault shares, and its partner Nissan Motor. Fiat did not rule out the possibility of resuming talks with Renault.
France’s Finance Minister Bruno Le Mer welcomed the deal, saying it would allow both companies to invest in green technologies and meet the challenges in the field.