ROME – Italian-American group Fiat Chrysler (FCA) and French carmaker PSA, manufacturer of Peugeot-Citroën, have agreed a 50/50 merger.
The deal will create the fourth largest automobile manufacturer in the world and save an estimated 3.7 billion euros ($4 billion) through synergies and technology sharing.
According to a joint statement from the two groups on Wednesday, the new company, which is yet to be named, will be the third-largest in the market in terms of revenue with roughly 8.7 million units a year, valued at 170 billion euros.
The merger will go ahead without the need to close factories and shareholders will be giving a 50/50 stake.
FCA and PSA will each appoint five members to a board of directors while Carlos Tavares, the current CEO of PSA, will become the CEO of the new company. John Elkann, the chairman of FCA, will become the chairman of the new group.
Tavares said: “Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services.”
The new group hopes to obtain a recurring operating profit of 11 billion euros, according to the statement.
Mike Manley, CEO of FCA, said: “This is a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors.”
Current PSA shareholdings in the form of Chinese group Dongfeng, BPIFrance (the French State) and the Peugeot family will move around.
Dongfeng will transfer 30.7 million shares to PSA, resulting in a 4.5 percent ownership of the new group while BPIFrance and the Peugeot family will settle on 6 percent each.
The merger is expected to conclude in 12-15 months.
PSA had already been in talks with Fiat at the beginning of the year but the Italian carmaker – controlled by the Agnelli family under the chair of Elkann – rejected the initial proposal to try its luck with Renault, which was eventually scuppered by the French government, a Renault stakeholder.