FCA, PSA Confirm Plan to Merge in 50:50 Deal

Fiat Chrysler Automobiles NV and PSA Group have detailed plans to merge into a new company owned 50:50 by shareholders of the Italian and French carmakers.

The deal would create the world’s fourth-largest carmaker with annual sales of 8.7 million vehicles and a market value of about $50 billion. The entity would generate about €170 billion ($189 billion) in revenue and an operating profit of more than €11 billion ($12.2 billion).

FCA and PSA estimate the merger will enable €3.7 billion ($4.1 billion) in annual savings, 80% of which would be realized in the first four years. The calculations assume no plant closures.

The partners are going to considerable lengths to balance benefits of the proposed merger. But today FCA shares rose and PSA shares fell, indicating that investors perceive FCA as recipient of the better deal. FCA shares also were lifted by the company’s plan to distribute a special dividend totaling €5.5 billion ($6.1 billion) ahead of the merger.

The two companies propose to execute the deal through a new parent company set up for tax purposes in the Netherlands. Business operations would continue to function through existing regional headquarters in France, Italy and the U.S.

The companies expect to run the combined business with an 11-member board designed to give each partner equal clout. FCA would nominate five board members, including its current chairman John Elkann, who would chair the new entity.

PSA also would nominate five members, including the board’s vice chairman and the senior independent director. PSA CEO Carlos Tavares would become chief executive of the merged companies.