The automotive world has been on been shaken up over the news that Fiat Chrysler Automobiles N.V. (FCA) has reached out to the Board of Groupe Renault, proposing a 50/50 merger of the two automotive companies. The proposal from FCA follows initial operational discussions between the two companies to identify products and geographies where they could collaborate, particularly as they develop and commercialize new technologies.
These discussions made clear that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development. The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification, and autonomous driving.
The combined business would sell approximately 8.7-million vehicles annually, would be a world leader in electric vehicles (EV) technologies, premium brands, SUVs, pickup trucks and light commercial vehicles and would have a broader and more balanced global presence than either company on a standalone basis. The benefits of the merger are not based on plant closures but are estimated on more capital efficient investment in common global vehicle platforms, architectures, powertrains, and technologies.
According to the FCA, benefits from the combination of the two businesses would be shared, 50% by current FCA shareholders and 50% by current Groupe Renault shareholders. Before the transaction is closed, to mitigate the disparity in equity market values, FCA shareholders would also receive a dividend of €2.5 billion (or $2.8 billion USD). Shareholders in each company would receive an equivalent equity stake in the combined company. The combination would be carried out as a merger transaction under a Dutch parent company.
The Board of the combined entity would initially be composed of eleven members, with the majority being independent and with equal representation of four members each for both FCA and Groupe Renault, as well as one nominee from Nissan. Further, there would be no carryover of existing double voting rights. However, all shareholders would have the opportunity to earn loyalty voting rights from the completion of the transaction under a loyalty voting program. The parent company would be listed on the Borsa Italiana in Milan, Euronext in Paris, and the New York Stock Exchange (NYSE).
The combination would create a brand portfolio that would provide full market coverage with a presence in all key segments from luxury/premium brands, such as Maserati and Alfa Romeo, to the strong access brands of Dacia and Lada, and would include the well-known Fiat, Renault, Jeep and Ram brands as well as commercial vehicles. Groupe Renault has a strong presence across Europe, Russia, Africa, and the Middle East, while FCA is uniquely positioned in the high margin segments in North America and is a market leader in Latin America. FCA’s evolving capability in autonomous driving, which includes partnerships with Waymo, BMW and Aptiv, is complemented by Groupe Renault’s decade of experience in EV technology where it is the highest-selling EV original equipment manufacturer (OEM) in Europe.
Groupe Renault released an official statement Monday stating “after careful review of the terms of FCA’s friendly proposal, the Board of Directors decided to study with interest the opportunity of such a business combination, comforting Groupe Renault’s manufacturing footprint and creating additional value for the Alliance”.
The proposed merger would morph the two companies into the third largest automaker in the world behind Volkswagen and Toyota. But the proposal has a lot of Mopar fans worried about what will happen to their core Mopar brands. It also brings back the terrible memories of the “merger of equals” with Daimler-Benz in 1998, that left the company on life support.
If successful, the merger would allow the new company to create new products at a much lower rate of cost for development and at a lot faster rate.
Source: FCA and Groupe Renault