Fiat, Peugeot aim for $50B tie-up
MILAN/PARIS Talks between Fiat Chrysler and Peugeot owner PSA over a potential tie-up that could create a Us$50-billion car giant gathered pace on Wednesday, with one source saying a deal could be announced as early as Thursday.
The two groups said in separate statements they were holding talks aimed at creating one of the world’s leading auto makers, better placed to tackle a host of costly technological and regulatory challenges facing the global auto industry.
Under the proposed deal Fiat Chrysler would pay shareholders a 5.5-billion euro special dividend, people familiar with the talks said.
Peugeot would spin off its stake in auto parts maker Faurecia valued at around three billion euros while Fiat Chrysler could dispose of its stake in factory robot maker Comau valued at about 250 million euros, these people said. Final terms of the agreement could change and have not been formally disclosed, they said.
The combined company’s board of directors would have 12 members — five from Peugeot’s side, five from Fiat Chrysler’s, along with chief executive Carlos Tavares and as chairman, John Elkann, currently chairman of Fiat Chrysler,
the people said.
Both companies have called unscheduled board meetings on Wednesday to discuss the potential deal, the people said, while one source familiar with the discussions said an agreement could be announced as soon as Thursday.
Spokespeople for Fiat Chrysler Automobiles (FCA) and PSA declined to comment on a timeline.
After ditching a proposed merger with Renault in June, Elkann confirmed the group’s bid to pursue an alternative alliance as carmakers face huge investments in electrification, emission reduction and autonomous driving technologies.
Milan-listed shares in FCA rallied more than 10 per cent on Wednesday, after ending up more than 7.5 per cent on Tuesday in New York. Peugeot shares rose more than six per cent to hit their highest in more than 11 years.
The merged entity would face major challenges, as auto manufacturers grapple with a global downturn in demand while trying to develop costly, cleaner car models.
A combination of PSA and FCA would have to overcome political, financial and governance hurdles, though it elicited an encouraging early response from the French government, a key PSA investor.
France’s dithering over FCA’S pursuit of Renault — in which it is also a shareholder — contributed to the collapse of that merger plan.
French government spokeswoman Sibeth Ndiaye said Paris was following the PSA-FCA talks closely with an eye on the fallout for jobs, but said an enlarged group was ultimately “the best path to protecting employment.”