Fiat Chrysler and Renault in merger talks to create a EUR 33 billion market cap giant

Fiat Chrysler (FCA) intends to merge with Renault and it made a ”transformative fusion” proposal to the French group according to a stock-exchange announcement. If the transaction will close it will create a third global leader and would solve some of the Italian-American and Renault’s weaknesses.

The Fiat-Chrysler proposal, finalized during last night talks with Renault, is being discussed at Renault’s Board of Directors meeting on Monday morning. The transaction will create the third-largest global carmaker, with annual sales of 8.7 million vehicles and a solid presence in key regions, which will generate annual savings of about EUR 5 billion (USD 5.6 billion), according to a FCA communiqué.

Following the merger, Fiat Chrysler and Renault will set up a holding company listed in the Netherlands. After paying a special dividend of EUR 2.5 billion to FCA shareholders, each group will hold 50 percent of the new shares of the combined entity.

On Saturday, the British Financial Times (FT) reported citing sources wishing to remain anonymous that the two producers are negotiating a comprehensive alliance, and the two companies are trying to join forces to cope with structural changes faces the automotive industry globally.

The combined market capitalization of Fiat Chrysler and Renault is about EUR 33 billion (USD 37 billion). A potential agreement would cause Fiat Chrysler to join the Renault-Nissan-Mitsubishi alliance in the future, FT claims.

The combined company resulting from the merger between Renault and FCA would then start new acquisitions that would expand its business in the fight for world domination with Volkswagen and Toyota rivals, FT said.

Renault and Nissan have a partnership since 1999, where Renault holds 44.3 percent of Nissan shares, while Nissan controls a 15 percent stake in Renault, but has no voting rights to the French group. The Renault-Nissan Alliance was expanded in 2016 by including Mitsubishi.