Amidst a number of rumours and speculations, Groupe PSA and Fiat Chrysler Automobiles (FCA) Group have officially announced that the automotive giants will be entering into a 50:50 merger under a Dutch parent company. The boards of both companies have given the nod to the collaboration and the companies will be working to finalise a Memorandum of Understanding in the coming weeks. The power move is a giant leap for the automakers with the merger creating - FCA-Peugeot - as the world's fourth-largest automaker with over 8.7 million cars sold annually. The new group will be headed by Group PSA CEO - Carlos Tavares, while FCA's top boss John Elkann will serve as the chairman. There will be eleven members on the board of the group with five members nominated by either company respectively.
Carlos Tavares, Groupe PSA CEO, said: "This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity. I'm pleased with the work already done with Mike and will be very happy to work with him to build a great company together."
Mike Manley, FCA CEO, said, "I'm delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination. We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company."
Shareholders of Peugeot and FCA will own 50 per cent of the equity in the new company, which is projected to achieve 80 per cent of the synergies after four years, and cut overall costs by about 2.8 billion Euros. The total combined revenues for both companies in 2018 stood at nearly 170 billion Euros and a recurring operating profit of over 11 billion Euros. The companies say that the merger will lead to value growth of 3.7 billion Euros in annual run rate. The new Dutch parent company will be listed on the New York Stock Exchange, Borsa Italiana (Milan) and Euronext (Paris). The auto manufacturers have also clarified that that merger will not lead to any plant closures.
The results of the merger are expected to be huge for the western automotive landscape as a number of brands under the umbrellas of the respective companies come together. Previously, FCA was seeking partnership with Renault for a similar merger, but the discussions fell through in what was described as "unfavourable political conditions."