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Fiat and Peugeot sign binding merger agreement

By Yana Berman

The deal worth $50bn is set to create the world’s fourth-largest car maker

Fiat Chrysler Automobiles (FCA) and Peugeot-maker PSA Group have signed a 50/50 merger agreement, according to a joint statement published on December 18. The companies aim to create the world's fourth-largest car maker by volume and the third largest by revenue.

The merger plans were initially announced in late October. The two companies have decided to unite in order to confront a global drop in car sales.

Back then the car manufacturers claimed that in creating sales of 8.7 million vehicles annually, the combined company would realise among the highest margins in the markets where it would operate, based on FCA’s strength in North America and Latin America and PSA’s in Europe.

The name of the new company has not yet been revealed. The deal, which is expected to be finalised in 12 to 15 months, is expected to save $4bn (£3bn, €3.6bn) in costs annually.

The new company's board will comprise five members nominated by PSA and the other five nominated by FCA, including the senior independent director and vice-chairman.

Carlos Tavares, the current chief executive officer and chairman of PSA, will be the new chief executive officer of the combined company for an initial term

Prior to the merger Chinese Dongfeng Motor Group, which owns a 12.2 per cent stake worth approximately $787.4m in PSA, will trim it and sell 30.7m shares back to the French car maker. Therefore, Donfeng will end up having 4.5 per cent stake in the new group.

The merger has already faced a backlash among other car makers, with the US General Motors filing a lawsuit against FCA over alleged union bribing. However, the litigation has not affected the terms of the merger.

FURTHER READING: Fiat Chrysler and Peugeot merge to create world's fourth-largest vehicle manufacturer

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