Home / Cars / Fiat Chrysler and Peugeot Citroen merger gets board approval

Fiat Chrysler and Peugeot Citroen merger gets board approval

Hugo Griffiths 2019-10-31 09:50

FCA and Groupe PSA merger looks more certain than ever following board approval; union would create world's fourth largest car company

The proposed merger of Fiat Chrysler Automobiles (FCA), and Groupe PSA – owners of Peugeot, Citroen, Opel/Vauxhall and DS – looks more likely than ever, after the boards of both companies confirmed they had "unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger."

A legally binding memorandum of understanding – the precursor to a full deal – will be finalised in "the coming weeks." The merger would create the world's fourth-largest car company, behind only the Volkswagen Group, Toyota, and the RenaultNissan alliance.

The news comes as the two groups released a joint statement adding more details to the earlier confirmation of merger talks. An advantageous move for both firms, merging would provide PSA access to American markets, while FCA would potentially be able to make use of PSA's newer, and electrified, vehicle architectures. The scale of the future giant would also present new opportunities linked to autonomous and connected vehicle projects.

Ownership of the merged companies would be split 50-50 between PSA and FCA shareholders, with a €5.5 billion dividend for FCA shareholders, with PSA shareholders receiving a reported €3 billion. The resultant company would produce an extimated 8.7 million vehicles a year.

FCA had net revenues of €115.4 billion (£99.66bn) on sales of 4.84 million vehicles across brands including Fiat and Jeep in 2018, on which profits of €5bn (£4.3bn) were generated – a profit increase of 34 per cent on the previous year. Groupe PSA, meanwhile, sold 3.88 million vehicles last year, generating €74 billion (£63bn) in revenue, and €3.295 billion (£2.844bn) in consolidated net income, up 40.4 per cent on 2017.

Car companies are increasingly seeking business synergies and mergers as markets become ever-more competitive and crowded, and regulations continue to make the future of automobile production and use uncertain. In April this year, news broke that FCA would link up with Tesla to share its ‘pool’ of CO2 emissions in order to comply with EU regulations. Ford, meanwhile, will use Volkswagen’s MEB platform to build electric cars from 2023.

FCA CEO Mike Manley said: "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."

Carlos Tavares, PSA's CEO, said: “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.”

Do you think a Fiat Chrysler and Peugeot Citroen merger is a good idea? Let us know your thoughts below…

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