Fiat Chrysler Automobiles (FCA) announced on May 27 that it has made a proposal to French automaker Renault for a “transformative merger”.
The deal, once made official, is expected to create a world leader and help address some of the weaknesses of both companies.
According to FCA, the 50 percent of the combined business will be owned by FCA shareholders, while the other half will be owned by Renault shareholders.
The proposal was finalized in overnight talks with Renault and was revealed to have been discussed at a meeting of Renault’s board on Monday.
According to statement by FCA, the deal would create an automaker with a strong presence across key regions, automotive markets and technologies, and is expected to generate 5 billion euros ($5.6 billion) in annual savings.
The “broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream,” said FCA.
It also clarified that both brands have not discussed plans on plant closures.
Once finalized, the merge would put the two companies under a listed Dutch holding company. FCAE shareholders will be paid a 2.5 billion-euro special dividend, after which each group would be given 50 percent of the combined entity in new stock.
As of Friday, May 24, FCA and Renault had a combined market value of 32.6 billion euros.
In 2018 alone, the two companies collectively built approximately 8.7 million cars, a number reported to be significantly more than those of Hyundai Motor Group and General Motor, but behind the world’s two biggest automakers — Volkswagen Group and Toyota Motor — which produced 10 million vehicles last year. Renault, however, is also considered to have reached the milestone with its existing alliance with Nissan and Mitsubishi.
The FCA-Renault merger, including the companies’ respective Japanese partners, would bring the total to more than 15 million vehicles a year, with a strong presence in all major markets and premium brands. Among these brands are Jeep, Maserati, Alfa Romeo, and Infiniti.
Both FCA and Renault went through changes in its leadership in 2018 after FCA’s Sergio Marchionne died and Carlo Ghosn of Renault-Nissan alliance was arrested on financial crime charges. Ghosn’s arrest is rumored to have widened the rift between Renault and Nissan.