Fiat Chrysler Automobiles Intends to Merge with Renault SA

Fiat Chrysler Automobiles NV suggested a merger with Renault SA in order to create the world’s third-largest carmaker as producers struggle for scale so as to tackle the costly move to autonomous driving and electrification.

Fiat stated that the contract, through a Dutch holding company, would be designed as 50-50 ownership. Shareholders at Renault would get an implied premium of nearly 10 percent. Renault’s board has stated that they would go over the “friendly” offer.

Fiat and Renault are planning to proceed without Nissan Motor Co., Renault’s 20-year partner, and also the Mitsubishi Motors Corp. On the merger talks with Renault, Fiat has agreed to not pursue a short term contract with Nissan, according to sources. It would be acceptable for Nissan, the Japanese company, to join the merged forces later on.

The elaborate plan would succeed in making Exor NV, the Agnelli family’s holding company (founding shareholders of Fiat), the biggest investor in the merged entity. John Elkann, chairman of Fiat, would most probably hold his position whereas Jean-Dominique Senard, the chairman for Renault, would be termed as the chief executive officer, say related sources.

Shares for Renault rose to about 16.7%. For Fiat, they surged to nearly 19.5%, the greatest they have risen. Merged, their total market value was approximately 35 billion euros.

These plans are a response to the extreme pressure carmakers are currently facing to spend greatly on novel technologies. Both Fiat and Renault hope that their joint yearly synergies would sum up to be more than 5 billion euros.

Juergen Pieper, the analyst at Bankhaus Metzler, stated that while the proposal for a merger between Fiat and Renault looks to be very promising on paper, its execution would not be a simple matter without hurdles.