(Bloomberg) -- Fiat Chrysler Automobiles NV and French
carmaker PSA Group’s talks on a possible combination point to an
intensifying push for global consolidation in an industry
struggling with a downturn and expensive shift to electric cars.
Fiat and PSA confirmed Wednesday in separate statements
they’re holding discussions aimed at creating one of the world’s
leading auto groups. PSA shares rose the most in just over a
year, while Fiat jumped as much as 11%.
The companies didn’t give details on what any deal would
look like. Under one recent proposal, the maker of Peugeot brand
cars would be the acquiring entity and the French side would
have an advantage in terms of board seats, according to people
familiar with the matter. PSA’s board is holding an
extraordinary meeting later Wednesday, said the people who asked
not to be named because the information isn’t public.
A merger of Fiat Chrysler and PSA, the No. 2 for car sales
in Europe, would create a regional powerhouse to rival
Volkswagen AG, and have a stock-market value of about $49
billion — comparable to Japan’s Honda Motor Co. The tie-up would
also bring together two auto-making dynasties, the billionaire
Agnelli clan in Italy and the Peugeot family of France.
The talks come several months after Fiat Chrysler and PSA,
led by Chief Executive Officer Carlos Tavares, explored a
partnership on pooling investment to build cars in Europe, and
following the collapse of negotiations between Fiat Chrysler and
French competitor Renault SA in June.
Under one recent proposal, Fiat and PSA have discussed
making Tavares CEO of the combined company while John Elkann,
scion of the Italian-American automaker’s founding Agnelli
family, would be chairman, one person said.
The French government would play a key role in any deal
because France is one of the biggest owners of PSA, whose brands
include Peugeot, Opel and Citroen.
Billionaire Agnellis Make Another Bet on France: Chris
Bryant
Analysts greeted word of a possible deal warmly. “In our
view the combination of FCA and PSA has more logic than the
previously attempted FCA-RNO deal and has a far greater chance
of success,” Max Warburton, a Bernstein analyst, wrote in a note
to clients.
Fiat shares rose 8.5% to 12.75 euros at 9:17 a.m. in Milan
while PSA stock was up 7.7% to 26.84 euros in Paris.
Pressure on Automakers
Automakers face tremendous pressure to combine forces and
share costs from platform development to manufacturing and
purchasing as they battle through trade wars, a global slowdown
and an expensive shift toward electrification and autonomous
driving. Volkswagen in July said it will work with Ford Motor
Co. on electric and self-driving car technology, while Toyota
Motor Corp. is strengthening ties with partners such as Subaru
Corp. and China’s BYD Co.
In Europe, PSA and Fiat Chrysler face the additional burden
of new emissions regulations that will force the industry to
meet stringent fleet requirements next year.
“If completed, we believe this should ignite more rational
industry behavior around allocation of capital ,and this
particular merger makes materially more sense than a potential
FCA-Renault merger,” said Arndt Ellinghorst, an Evercore
analyst. He said it’s an opportunity to achieve “gross
synergies” above 7 billion euros ($7.8 billion) by 2023 due to
overlapping businesses in Europe, Latin America and China.
The companies’ Chinese businesses have been trailing
competition and it’s unlikely that a merger would quickly
reignite their revenue growth in the world’s biggest car market.
China’s Dongfeng Motor Corp., which holds about 12% of PSA,
could also have a say on the deal.
Mega Merger Wouldn’t Fix PSA-Fiat Chrysler’s China Woes
PSA has been floated as a logical merger partner with Fiat,
because of their complementary product and geographic fit, and
the two sides talked about a possible partnership earlier this
year. However, the Italian-American carmaker instead pursued a
deal with Renault. Those talks were called off in June amid
opposition from the French government and a lack of support from
Renault’s Japanese alliance partner Nissan Motor Co.
What Bloomberg Intelligence Says
Fiat Chrysler’s leaned-out figure offers North America
volume and profit in the form of the Jeep and Ram brands, while
Peugeot would bring Europe profitability to the marriage.
Kevin Tynan, Automobiles analyst
Fiat Chairman Elkann had walked away from the potential
deal with Renault blaming “political conditions in France.” Fiat
Chrysler signaled at the time that the French state would have
to give up its sway over Renault for a resumption of talks,
people with knowledge of the situation said at the time.
Tavares said earlier this year that Peugeot would be
returning to the U.S., which the brand exited in 1991. Tavares
said the brand will begin shipping vehicles to North America
from Europe or China in 2026.
Fiat Chrysler is seen as a laggard in new technologies such
as electrification and autonomy, which are expected to cost
automakers billions of dollars over the next decade. The company
has sought to secure its future with a larger partner for
several years, dating back to late CEO Sergio Marchionne’s
failed courtship of General Motors Co. After being rebuffed by
GM in 2015, rumors of talks with other automakers have swirled
with varying intensity.
carmaker PSA Group’s talks on a possible combination point to an
intensifying push for global consolidation in an industry
struggling with a downturn and expensive shift to electric cars.
Fiat and PSA confirmed Wednesday in separate statements
they’re holding discussions aimed at creating one of the world’s
leading auto groups. PSA shares rose the most in just over a
year, while Fiat jumped as much as 11%.
The companies didn’t give details on what any deal would
look like. Under one recent proposal, the maker of Peugeot brand
cars would be the acquiring entity and the French side would
have an advantage in terms of board seats, according to people
familiar with the matter. PSA’s board is holding an
extraordinary meeting later Wednesday, said the people who asked
not to be named because the information isn’t public.
A merger of Fiat Chrysler and PSA, the No. 2 for car sales
in Europe, would create a regional powerhouse to rival
Volkswagen AG, and have a stock-market value of about $49
billion — comparable to Japan’s Honda Motor Co. The tie-up would
also bring together two auto-making dynasties, the billionaire
Agnelli clan in Italy and the Peugeot family of France.
The talks come several months after Fiat Chrysler and PSA,
led by Chief Executive Officer Carlos Tavares, explored a
partnership on pooling investment to build cars in Europe, and
following the collapse of negotiations between Fiat Chrysler and
French competitor Renault SA in June.
Under one recent proposal, Fiat and PSA have discussed
making Tavares CEO of the combined company while John Elkann,
scion of the Italian-American automaker’s founding Agnelli
family, would be chairman, one person said.
The French government would play a key role in any deal
because France is one of the biggest owners of PSA, whose brands
include Peugeot, Opel and Citroen.
Billionaire Agnellis Make Another Bet on France: Chris
Bryant
Analysts greeted word of a possible deal warmly. “In our
view the combination of FCA and PSA has more logic than the
previously attempted FCA-RNO deal and has a far greater chance
of success,” Max Warburton, a Bernstein analyst, wrote in a note
to clients.
Fiat shares rose 8.5% to 12.75 euros at 9:17 a.m. in Milan
while PSA stock was up 7.7% to 26.84 euros in Paris.
Pressure on Automakers
Automakers face tremendous pressure to combine forces and
share costs from platform development to manufacturing and
purchasing as they battle through trade wars, a global slowdown
and an expensive shift toward electrification and autonomous
driving. Volkswagen in July said it will work with Ford Motor
Co. on electric and self-driving car technology, while Toyota
Motor Corp. is strengthening ties with partners such as Subaru
Corp. and China’s BYD Co.
In Europe, PSA and Fiat Chrysler face the additional burden
of new emissions regulations that will force the industry to
meet stringent fleet requirements next year.
“If completed, we believe this should ignite more rational
industry behavior around allocation of capital ,and this
particular merger makes materially more sense than a potential
FCA-Renault merger,” said Arndt Ellinghorst, an Evercore
analyst. He said it’s an opportunity to achieve “gross
synergies” above 7 billion euros ($7.8 billion) by 2023 due to
overlapping businesses in Europe, Latin America and China.
The companies’ Chinese businesses have been trailing
competition and it’s unlikely that a merger would quickly
reignite their revenue growth in the world’s biggest car market.
China’s Dongfeng Motor Corp., which holds about 12% of PSA,
could also have a say on the deal.
Mega Merger Wouldn’t Fix PSA-Fiat Chrysler’s China Woes
PSA has been floated as a logical merger partner with Fiat,
because of their complementary product and geographic fit, and
the two sides talked about a possible partnership earlier this
year. However, the Italian-American carmaker instead pursued a
deal with Renault. Those talks were called off in June amid
opposition from the French government and a lack of support from
Renault’s Japanese alliance partner Nissan Motor Co.
What Bloomberg Intelligence Says
Fiat Chrysler’s leaned-out figure offers North America
volume and profit in the form of the Jeep and Ram brands, while
Peugeot would bring Europe profitability to the marriage.
Kevin Tynan, Automobiles analyst
Fiat Chairman Elkann had walked away from the potential
deal with Renault blaming “political conditions in France.” Fiat
Chrysler signaled at the time that the French state would have
to give up its sway over Renault for a resumption of talks,
people with knowledge of the situation said at the time.
Tavares said earlier this year that Peugeot would be
returning to the U.S., which the brand exited in 1991. Tavares
said the brand will begin shipping vehicles to North America
from Europe or China in 2026.
Fiat Chrysler is seen as a laggard in new technologies such
as electrification and autonomy, which are expected to cost
automakers billions of dollars over the next decade. The company
has sought to secure its future with a larger partner for
several years, dating back to late CEO Sergio Marchionne’s
failed courtship of General Motors Co. After being rebuffed by
GM in 2015, rumors of talks with other automakers have swirled
with varying intensity.
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