Fiat Chrysler Automobiles and Peugeot S.A. (Groupe PSA) have signed an agreement for a 50:50 merger of their businesses to create the 4th largest global automotive manufacturer by volume and 3rd largest by revenue. In a statement, the companies say the proposed combination will be an industry leader with the management, capabilities, resources and scale to successfully capitalise on the opportunities presented by the new era in sustainable mobility.
While the official communication that says global scale and resources will be owned 50 per cent by Groupe PSA shareholders and 50 per cent by FCA shareholders, analysts are of the opinion the dynamics of the merger could be more complicated than the perfect 50:50 deal that is being projected. Indeed, with quite a few stakeholders including French and Italian governments and the Agnelli and Peugeot families, going forward with the deal is sure to be a complex matter, and as experts point out, could leave PSA shareholders shortchanged. However, if the top management at both the firms and the shareholders manage to address apprehensions and make it work, this will be one of the biggest developments in the automobile world for some time now.
With its combined financial strength and skills, the merged entity will be in a good position to provide innovative, clean and sustainable mobility solutions. The combined company will have annual unit sales of 8.7 million vehicles, with revenues of nearly €170 billion , recurring operating profit of over €11 billion and an operating profit margin of 6.6 per cent, all on a simple aggregated basis of 2018 results .
The combined entity will also have a balanced global presence with an extensive brand portfolio covering all key vehicle segments from luxury, premium, and mainstream passenger cars through to SUVs and trucks and light commercial vehicles. It will also be able to leverage FCA’s strength in North America and Latin America and Groupe PSA’s solid base in Europe.
The new entity will also look to gain efficiencies from optimising investments in vehicle platforms, engine families and new technologies while leveraging increased scale. The merged entity will also see a streamlined governance structure, with a Board comprised of 11 members, the majority of whom will be independent. Five Board members will be nominated by FCA and its reference shareholder (including John Elkann as Chairman) and five will be nominated by Groupe PSA and its reference shareholders (including the Senior Non-Executive Director and the Vice Chairman). At closing the Board will include two members representing FCA and Groupe PSA employees . Carlos Tavares will be Chief Executive Officer for an initial term of five years and will be a member of the Board.
Completion of the proposed combination is expected to take place in 12 to 15 months, subject to customary closing conditions, including approval by both companies’ shareholders at their respective Extraordinary General Meetings and the satisfaction of antitrust and other regulatory requirements.
Carlos Tavares, Chairman of the Managing Board of Groupe PSA, said: “Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services. I have every confidence that with their immense talent and their collaborative mindset, our teams will succeed in delivering maximized performance with vigor and enthusiasm.”
Mike Manley, Chief Executive Officer of FCA, added: “This is a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait - they see challenges as opportunities to be embraced and the path to making us better at what we do."