Fiat Chrysler proposes 33bn merger with Renault

Combined entity would become the world’s third-largest carmaker

Fiat Chrysler Automobiles has proposed a €32.6bn all-share merger with Renault, a deal that would reshape the global automotive industry and add new life to the French carmaker’s alliance with Japan’s Nissan.

The proposal for a “transformative merger” would see FCA and Renault each own 50 per cent of the business, which would have combined sales of 8.7m vehicles a year — larger than General Motors and third globally behind Volkswagen and Toyota.

The combined group would have nearly €170bn in annual revenue on operating profit of more than €10bn, and net profit exceeding €8bn, FCA said. It would have a large presence in North America as well as Europe and Latin America, and expertise stretching from small electric vehicles to pick-up trucks.

The proposed tie-up comes despite the departure over the past year of the dominant executives at the two companies who long advocated consolidation: FCA’S Sergio Marchionne and Renault’s Carlos Ghosn. Marchionne died in July, while Mr Ghosn was arrested in Tokyo in November on charges of financial misconduct. Mr Ghosn has maintained his innocence.

A combination would also bring together Italy’s Agnelli family, which owns 29 per cent of FCA, and the French government, which owns 15 per cent of Renault, as the dominant shareholders in the merged company.

Both have commanded voting rights beyond their respective shareholdings, but that would fall away through the deal. Their respective shareholdings would also be halved in the new entity.

The top leadership positions were not disclosed in Monday’s proposal. However, John Elkann, who steers Exor, the Agnelli family investment vehicle, is expected to become chairman at the merged group, while Renault chair Jean-dominique Senard would be named chief executive, multiple people close to the talks said. Englishman Mike Manley, chief executive of FCA, is expected to be named chief operating officer.

A board of 11 representatives would include four representatives each from FCA and Renault and one nominee from Nissan.

Shares in Renault, which began Monday with a market value of almost €15bn, surged 13.8 per cent in early Paris trading. FCA, which started the day worth less than €18bn, climbed 10.6 per cent.

Because of the differences in market value at the start of the day, FCA shareholders would receive a dividend of €2.5bn before the deal closes. The value of the transaction will fluctuate with the share prices.

Although not included in the proposal, the deal would also involve Renault shelving plans to merge with alliance partner Nissan in the short term, according to people briefed on the discussions. Nissan holds a 15 per cent stake in the French group with no voting rights.