30/10/2019

30 October 2019
30 October 2019, Comments Comments Off on Merger talks confirmed between automotive giants Groupe PSA and FCA
Merger talks confirmed between automotive giants Groupe PSA and FCA

The Group PSA (Peugeot) and FCA (Fiat Chrysler Automobiles) have confirmed they are planning to join forces to become a ‘world leader for a new era in sustainable mobility’.

A merger of these two automotive groups gives them a global scale and resources owned 50 percent by Groupe PSA shareholders and 50 percent by FCA shareholders. With new challenges in connected, electrified, shared and autonomous mobility, the combined entity would leverage a strong global R&D footprint and ecosystem to foster innovation and meet these challenges with speed and capital efficiency.

  • The merger would create the 4th largest global OEM in terms of annual unit sales (8.7m vehicles)
  • The combined company would realize among the highest margins in the markets where it operates, based on FCA’s strength in North America and Latin America and Groupe PSA’s in Europe
  • The combination would unite the groups’ respective brand strengths across Luxury, Premium, Mainstream Passenger Car, SUV and Trucks & Light Commercial – making them stronger together
  • The merged entity would bring together the companies’ extensive and growing capabilities in the technologies shaping the new era of sustainable mobility, including electrified powertrain, autonomous driving and digital connectivity
  • Approximately €3.7 billion estimated annual run-rate synergies without any plant closures resulting from the transaction
  • Highly respected combined management team recognised for exceptional value creation and with proven success in previous OEM combinations
  • Dutch parent company Board would have balanced representation and a majority of independent Directors. John Elkann as Chairman and Carlos Tavares as CEO and member of the Board

The Supervisory Board of Peugeot S.A. and the Board of Directors of Fiat Chrysler Automobiles N.V. have each unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger. Both boards have given the mandate to their respective teams to finalize the discussions to reach a binding Memorandum of Understanding in the coming weeks.

The plan to combine the Groupe PSA and FCA businesses follows intensive discussions between the senior managements of the two companies. Both share the conviction that there is compelling logic for a bold and decisive move that would create an industry leader with the scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility.

The proposed combination would create the 4th largest global OEM in terms of unit sales (8.7 million vehicles), with combined revenues of nearly €170 billion and recurring operating profit of over €11 billion on a simple aggregated basis of 2018 results, excluding Magneti Marelli and Faurecia.

The significant value accretion resulting from the transaction is estimated to be approximately €3.7 billion in annual run-rate synergies derived principally from a more efficient allocation of resources for large-scale investments in vehicle platforms, powertrain and technology and from the enhanced purchasing capability inherent in the combined group’s new scale. These synergy estimates are not based on any plant closures.

It is projected that 80 percent of the synergies would be achieved after four years. The total one-time cost of achieving the synergies is estimated at €2.8 billion.

The shareholders of each company would own 50 percent of the equity of the newly combined group and would therefore share equally in the benefits arising from the combination. The transaction would be affected by way of a merger under a Dutch parent company and the governance structure of the new company would be balanced between the contributing shareholders, with the majority of the directors being independent. The Board would be composed of 11 members. Five Board members would be nominated by FCA (including John Elkann as Chairman) and five would be nominated by Groupe PSA (including the Senior Independent Director and the Vice Chairman). The Chief Executive Officer would be Carlos Tavares for an initial term of five years and he would also be a member of the Board.

Carlos Tavares 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 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.”

The new group’s Dutch-domiciled parent company would be listed on Euronext (Paris), the Borsa Italiana (Milan) and the New York Stock Exchange and would continue to maintain significant presences in the current operating head-office locations in France, Italy and the US.

This follows news earlier this year that FCA began talks about a merger with Renault, however this did not proceed.

The brands in the FCA group include Fiat, Chrysler, Dodge, Fiat Professional, Ram, Abarth, Alfa Romeo, Maserati, Lancia and Jeep. It also sells parts and services under the Mopar name and operates in the components and production systems sectors under the Comau and Teksid brands. FCA employs nearly 200,000 people around the globe. For more information regarding FCA, please visit www.fcagroup.com

The Group PSA, which employs 210,000 people, has five car brands, Peugeot, Citroën, DS, Opel and Vauxhall. Its ‘Push to Pass’ strategic plan represents a first step towards the achievement of the Group’s vision to be “a global carmaker with cutting-edge efficiency and a leading mobility provider sustaining lifetime customer relationships”. An early innovator in the field of autonomous and connected cars,

Vans from FCA and Group PSA are popular base vehicles for motorhomes and van conversions in Europe, which have been produced through joint a manufacturing facility at the Sevel factory in Italy.