The car manufacturer Fiat Chrysler and the owner of Peugeot, PSA, announced Thursday that they will join forces through a 50% share exchange to create the fourth largest car manufacturer in the world.
The boards of both groups have ordered their respective teams to conclude the discussions and reach a binding memorandum of understanding in the coming weeks, the two automakers said in a joint statement.
The president of FCA, John Elkann, will chair the group resulting from the merger, which will be based in the Netherlands, while Peugeot’s CEO Carlos Tavares will be its new CEO.
The agreement comes at a time when car manufacturers are dealing with a decline in global demand and try to develop technologically advanced and cleaner car models to meet increasingly stringent pollution regulations.
Once completed, the merger is expected to generate 3.700 billion euros per year (US $4.100 billion) in synergies, without any planned plant closure, they said.
Before closing the operation, Fiat Chrysler (FCA) will pay its shareholders an extraordinary dividend of 5.5 billion euros (US $ 6.1 billion) and will also distribute the shares of the robot manufacturing subsidiary Comau, the companies said.
In addition, Peugeot will distribute among its shareholders its 46% stake in the Faurecia component manufacturer.
French Finance Minister Bruno Le Maire welcomed the agreement and said he would give the two groups the muscle needed to invest in cleaner technologies and meet the challenges of the industry.
“The Government will be particularly attentive to control the industrial footprint (of the group) in France,” the Ministry added in a statement.
The group resulting from the merger, which will be based in the Netherlands, will have a board of directors composed of 11 people, six of whom will come from Peugeot, including its current CEO Tavares, and five from FCA, including its president Elkann
The group’s shares will be listed in Paris, Milan and New York.