Fiat Chrysler proposes merger with Renault

Fiat Chrysler Automobiles has proposed to merge with French carmaker Renault in a $32.6bn all-share deal that would create the world’s third-biggest company in the sector.

The proposal for a “transformative merger” would see FCA and Renault own 50% of the business, which would have combined sales of 8.7m vehicles a year making it third in the global ranking of car production behind Volkswagen and Toyota.

The combined group would have nearly €170bn in annual revenue on operating profit of more than €10bn and net profit exceeding €8bn, FCA said.

The transaction will be structured as a 50-50 ownership through a Dutch holding company, Fiat said in a statement Monday. This would give Renault investors an implied premium of about 10% and won’t entail plant closures.

Analyst at Link Analysis said: “Both automakers would be exploring different options to combine their businesses to face the market in a better position and with more financial muscle against the current slowdown in sales and changes in supply and demand that the sector is experiencing.

“We understand that this possible operation will not be the last in a changing sector and therefore is punished in the stock market. We hope that this merge is good news for the sector, and that listed companies are encouraged today in European markets.”

Shares in Renault surged 13.4% in early Paris trading and FCA shares climbed 9%.