The Supervisory Board of Peugeot S.A. and the Board of Directors of Fiat Chrysler Automobiles (FCA) 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 management of the two companies, the company said in a statement.
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 billion1 and recurring operating profit of over €11 billion2 on a simple aggregate basis of 2018 results excluding Magneti Marelli and Faurecia.
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, Chairman and CEO, Group PSA 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.”
According to the company, it is projected that 80% of the synergies would be achieved after 4 years. The total one-time cost of achieving the synergies is estimated at €2.8 billion.
The shareholders of each company would own 50% 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.
