Plans have been announced that will see auto makers Peugeot S.A (Groupe PSA) and Fiat Chrysler Automobiles (FCA) merge, creating the fourth largest global OEM in terms of unit sales, with combined revenues of almost €170 billion.
The companies stated that the Supervisory Board of Peugeot S.A. and the Board of Directors of Fiat Chrysler Automobiles have each unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger. Both boards have given the mandate to their respective teams to finalise the discussions to reach a binding Memorandum of Understanding (MoU) in the coming weeks.
The plan to combine the Groupe PSA and FCA businesses is said to follow intensive discussions between the senior managements of the two companies. Both reportedly share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to effectively manage the challenges of a new era in mobility.
With combined unit sales of around 8.7 million vehicles, there is estimated to be approximately €3.7 billion in annual run-rate synergies derived principally from a more efficient allocation of resources for large-scale investments in vehicle platforms, powertrain and technology, and from the enhanced purchasing capability inherent in the combined group’s new scale. It was added that these synergy estimates are not based on any plant closures.
The shareholders of each company would own 50% of the equity of the newly combined group and would therefore share equally in the benefits arising from the combination. The transaction would be affected by way of a merger under a Dutch parent company and the governance structure of the new company would be balanced between the contributing shareholders, with the majority of the directors being independent.
The board would be composed of 11 members. Five board members would be nominated by FCA (including John Elkann as Chairman) and five would be nominated by Groupe PSA (including the Senior Independent Director and the Vice Chairman). The Chief Executive Officer would be Carlos Tavares for an initial term of five years, and he would also be a member of the Board.
“This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together,” stated Carlos Tavares.
Mike Manley added, “I’m delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company.”
The new group’s Dutch-domiciled parent company would be listed on Euronext (Paris, France), the Borsa Italiana (Milan, Italy) and the New York Stock Exchange (USA), and the group would continue to maintain significant presences in the current operating head-office locations in France, Italy and the USA.