The respective boards of Groupe PSA (the parent company of Peugeot and Citroen) and Fiat Chrysler Automobiles (FCA) have announced a merger plan which would result in the creation of the world's fourth-largest automotive conglomerate by scale.

 

Combining the businesses is a step towards a plan to build an industry leader with “scale, capabilities and resources to capture successfully the opportunities and manage effectively the challenges of the new era in mobility.”

 

With projected unit sales around 8.7 million vehicles annually, the merged entity would have considerably more muscle to compete with heavyweights such as Toyota, the Volkswagen Group, Hyundai-Kia, and the Renault-Nissan-Mitsubishi Alliance.

 

Benefits of the merger would include large-scale investments in new platforms, powertrains and technology as well as from the enhanced purchasing capability.

 

It has been estimated that the merger would be 80 per cent complete after four years with no plant closures predicted.

 

Shareholders of the respective companies would also own 50 per cent of the equity in the newly combined group sharing equally in the benefits produced from the combination. A board of eleven members, five from FCA and five from Groupe PSA, would work with Carlos Tavares as the CEO for an initial term of five years should the merger be agreed upon.

 

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.”

 

Prior to completing the merger FCA would distribute a special dividend to its shareholders of €5.5 billion, as well as its shareholding in Comau. Likewise, Peugeot shareholders would get a distribution of the 46 per cent stake in Faurecia.

 

The extended portfolio would cover all market segments including Luxury, Premium, Mainstream Passenger Car, SUV and Trucks and Light Commercial.

 

Fiat, Alfa Romeo, Lancia, Maserati, Chrysler, Jeep, Dodge and Ram currently reside in the Fiat Chrysler stable, while Peugeot, Citroen, DS, Opel and Vauxhall are controlled by Groupe PSA.

 

The proposal would be submitted to the information and consultation process of the relevant employee bodies and would be subject to customary closing conditions, including final board approvals of the binding Memorandum of Understanding and agreement on definitive documentation.

 

Click here to read our take on the merger.