The board of french carmaker PSA Group has approved a merger with Fiat Chrysler, which would create the world’s fourth-largest carmaker, according to sources. Fiat Chrysler’s board met later Tuesday to discuss the deal after PSA’s board agreed to a merger, according to sources. The two sides are expected to announce a binding memorandum of understanding before European stocks open on Wednesday, the sources said. PsA and Fiat spokesmen declined to comment.
PSA and Fiat announced plans for the merger six weeks ago.
The merger would create a regional auto giant that could compete with Volkswagen, with a market capitalisation of about $46 billion — more than Ford Motor Co.
The merger will also be a union of two car-making dynasties: the Agnelli family, led by Fiat chairman John Elkann, and the Peugeot family in France.
China’s Dongfeng Motor, which owns 12 per cent of PSA, will own 4.5 per cent of the combined company, a person familiar with the matter said. PSA will buy a stake in Dongfeng Motor.
The merger will give PSA access to the long-awaited North American market and will also help Fiat develop low-emissions technologies.
However, Juergen Pieper, an analyst at Bankhaus Metzler, said on Tuesday that the merger would not solve all of their short boards.
Mr. Pippen said the combined company still did not have very high-end brands and the Chinese market position was not strong enough.