31 (Xinhua) — Fiat Chrysler (14.98, 0.75, 5.27%) (FCA) and Peugeot Citroen (PSA) officially announced a merger Thursday to create the world’s fourth-largest automaker. The two companies will each have a 50 per cent stake in the combined company and will create a $50bn car giant.
Fiat Chrysler was up 5.34 percent in the session as of 17:05, and the company has gained more than 10 percent in two trading days tuesday and Wednesday.
The two companies said in a statement that the talks opened the way to the creation of a new group with global size and resources, with 50 per cent of the shares held by PSA Group shareholders and 50 per cent of FCA shareholders.
In a rapidly changing environment, as new challenges in the areas of automotive connectivity, electrification, sharing and autonomous driving continue, the combined entity will leverage its strong global research and development footprint and ecosystem to drive innovation and meet these challenges with speed and capital efficiency.
FCA chairman John Elkann will be chairman of the combined group, and CARLOS Tavares, PSA’s chief executive, will be the new ceo.
The two sides said the merger would bring synergies of 3.7 billion euros ($4.1 billion) a year.
Fiat Chrysler failed to negotiate a merger with Renault about five months ago.
Dongfeng Motor Co. could become a major shareholder in the new company after the merger of Fiat Chrysler Automobiles and France’s Peugeot Citroen Group. Dongfeng is expected to continue to hold a stake in the French company.
According to Bill Russo, founder of Automobility Ltd, a Shanghai-based consultancy, Chinese state-owned enterprises often make long-term investments and acquire the capabilities and technology of their partners. Dongfeng is unlikely to take advantage of the merger plans of Peugeot Citroen and Fiat Chrysler as an exit plan.
Russo says Chinese state-owned enterprises need the capabilities provided by foreign partners to remain competitive in the market. Chinese state-owned enterprises often lack complex skills in integrating vehicle and system technology.
As part of a 2014 deal, Dongfeng acquired a 12 per cent stake in Peugeot Citroen, which is now worth about $3bn, giving the beleaguered Peugeot Citroen a better access to the Chinese market. Dongfeng could own about 6 per cent of the new company after completing a semi-stake in Peugeot Citroen and Fiat Chrysler.