Fiat Chrysler (FCA) and Peugeot owner PSA plan to join forces through a 50-50 share swap to create the world’s fourth-largest automaker, they said on yesterday, triggering a new wave of consolidation in the auto industry.
Fiat Chrysler and PSA said they aimed to reach a binding deal to create a US$50 billion company domiciled in the Netherlands, with listings in Paris, Milan and New York, and with PSA’s Carlos Tavares as chief executive and FCA’s John Elkann as chairman.
The move comes less than five months after FCA abandoned merger talks with PSA’s French rival Renault and would give both companies the scale to help manage a global downturn in auto markets as well as costly investments in new technologies such as electric and self-driving vehicles.
Photo: AFP
FCA would get access to PSA’s more modern vehicle platforms, helping it to meet tough new emissions rules, while Europe-focused PSA would benefit from FCA’s profitable US business.
However, adjusting for the differences in market value and planned dividend payments, achieving the 50-50 split would effectively see PSA paying a 32 percent premium to take control of FCA, Jefferies analyst Philippe Houchois said.
FCA shares yesterday jumped as much as 11 percent in early trade to hit a one-year high of 14.248 euros, while PSA shares fell as much as 13 percent to touch a two-week low of 22.77 euros.
“PSA shareholders are assuming more market risk than FCA’s,” Houchois said, although he added an FCA-PSA deal was still the most logical and attractive combination.
The FCA and PSA management teams will seek to finalize the discussions in the coming weeks to create a group with 8.7 million in annual vehicle sales, putting it fourth globally behind Volkswagen, Toyota and the Renault-Nissan alliance.
The deal aims to make savings of 3.7 billion euros (US$4.1 billion), without plant closures, and achieve about 80 percent of that within four years, at a one-off cost of 2.8 billion euros.
French Minister of the Economy and Finance Minister Bruno Le Maire welcomed the FCA-PSA tie-up, saying it would give them the critical mass needed to thrive in a fast changing industry.
Paris, which has a 12 percent stake in PSA, was blamed for the collapse of FCA’s talks with Renault as it urged the French firm to focus on its existing alliance with Japan’s Nissan Motor Co, Ltd.
The deal could still be subject to close regulatory scrutiny, while Rome, Paris and unions are likely to be wary about potential job losses.
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