Fiat’s £27bn bid to spark deals frenzy
FIAT Chrysler has made an audacious £27bn bid to merge with Renault, in a move that could spark a wave of car industry mega-deals.
Uniting Italian-American Fiat with French giant Renault would create the world’s third- largest car company, behind only Volkswagen and Toyota.
It would have an annual turnover of £150bn and sell more than 8.7m vehicles a year. If the tie-up goes ahead, it is likely to spark a frenzy of takeovers among other auto firms battling to survive amid slowing sales in Britain and across the West.
Shares in both of the companies jumped by more than 10pc after Fiat released the details of its offer, in a sign that investors in both firms are supporting the proposal.
Renault described the approach as ‘friendly’ and said it is studying Fiat’s proposal with interest.
It will release a more detailed response at a later date.
In a statement yesterday Fiat, whose brands include Alfa Romeo and Jeep, estimated the two companies could save £4.4bn a year by joining forces.
It said that no factories would need to close, though job cuts are expected at management level.
Car companies are facing major upheaval as customers ditch diesel due to new evidence it is highly polluting and harmful to health.
Meanwhile, the industry is gearing up for a costly transition away from traditional engines to primarily hybrid and electric cars.
This makes combining with rival firms a more attractive prospect, as it allows companies to pool resources and the cost of research. Fiat’s offer to merge with Renault could spark more companies to follow suit.
It comes after speculation this month that Vauxhall and Peugeot owner PSA Group wants to buy British car brand Jaguar land Rover, which is currently owned by Indian conglomerate Tata.
Although JlR and Tata repeatedly denied the rumours, France’s PSA has made it clear it would be keen to buy the luxury firm, which is Britain’s biggest car maker. Renault is in a global alliance with Japanese car makers Nissan and Mitsubishi.
Fiat said the alliance could make extra savings of £883m a year through the Renault-Fiat tie-up.
It has proposed a 50/50 deal that means the new company would be equally owned by the Fiat and Renault shareholders.
Because Fiat’s market value is slightly bigger than Renault’s, Fiat has said it will hand £2.2bn to its investors in a one-off dividend and will sell its robotics business, Comau.