Fiat Chrysler has made a “transformative” merger proposal to Renault, the Italian-American carmaker stated, in a deal that would make a new third-ranked global producer.
The plan, finalised in overnight talks with Renault, was being discussed at a meeting of the French group’s board early on Monday, and sent shares in the two organizations sharply higher.
The deal would make a carmaker selling 8.7 million vehicles every year with a strong presence crosswise over key regions, automotive markets and technologies, FCA said. It would produce 5 billion euros ($5.6 billion) in estimated annual savings.
The “broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream,” FCA included.
On the off chance that successful, the tie-up would alter the competitive landscape for opponent carmakers from General Motors to Peugeot producer PSA Group, which recently held its very own inconclusive talks with FCA.
It could likewise have significant repercussions for Renault’s 20-year-old alliance with Nissan, already weakened by the emergency encompassing the capture and ouster of previous chairman Carlos Ghosn before the end of last year.
Milan-listed Fiat Chrysler shares jumped 19% in early trade, while Renault stock leapt 17%. PSA shares fell 2.5%.
“FCA fits as well with Renault as it does with PSA,” Jefferies analyst Philippe Houchois said in a note after news of the deal talks broke.
The FCA-Renault plan would see the two carmakers merged under a listed Dutch holding organization. After payment of a 2.5 billion-euro dividend to current FCA shareholders, each investor group would get 50 percent of stock in the new organization.
It would be led by John Elkann, head of the Agnelli family that controls 29 percent of FCA, sources familiar with the deal talks told Reuters. Renault chairman Jean-Dominique Senard would almost certainly progressed toward becoming CEO, one said.
FCA-Renault, as pretty much every conceivable automotive pairing, had been studied discontinuously for years by dealmakers. Yet, the fractious relations among Ghosn and FCA’s late CEO Sergio Marchionne made constructive merger talks impossible until after Marchionne’s abrupt passing last July, banking sources said.
Pressure for consolidation among carmakers has developed with the difficulties presented by electrification, tightening emissions regulations and expensive new technologies being developed for connected and autonomous vehicles.
“The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry,” FCA said.