The boards of PSA Group and Fiat Chrysler Automobiles NV have approved another step toward a merger of the French manufacturers and Italian-American to create the world’s fourth-biggest carmaker, people who are familiar with the situation said.
Fiat Chrysler’s directors, late Tuesday accepted the deal late following a unanimous endorsement by the PSA board, said the people, who preferred not to be identified discussing confidential matters. The companies are expected to announce the signing of a binding memorandum of understanding before the markets in Europe open on Wednesday, they said.
Both, PSA and Fiat Chrysler representatives declined to comment on this matter.
The merger would lead a regional powerhouse to rival Germany’s Volkswagen AG and have a stock-market value close to $46 billion, surpassing Ford Motor Co. This tie-up would also bring together two auto-making dynasties – the Peugeots of France and he billionaire Agnelli clan of Italy, led by Fiat Chairman John Elkann.
The two companies revealed their merger discussions six weeks ago when they sketched out a plan for a 50-50 Netherlands-based holding company led by PSA CEO Carlos Tavares, with Elkann as the chairman.
The combination will give Peugeot-maker PSA a presence in in North America which has been long-sought and should also help Fiat gain ground in the developing low-emission technology. It doesn’t fix all of the their shortcomings yet, Juergen Pieper, an analyst at B. Metzler Seel Sohn & Co. told Square Business News on Tuesday.
The combined business would be lacking “a good position in China” as well as “very good premium brands” he said.
Fiat and PSA have been in talks on and off for a few months now, and were exploring a partnership to share investments and build cars in Europe as early as March next year.
China’s Dongfeng Motor Corp., which owns 12% of PSA, will see its stake in the combined company decline to 4.5% as a result of the merger and the sale of a portion of its holding to the French carmaker, people with information of this matter said.
Dongfeng’s stake in PSA has gained attention because of the possibility that it could interfere with U.S. regulatory approval for the deal.
Economic adviser Larry Kudlow said last month that the Donald Trump administration would review the proposed merger as the deal would give the Chinese carmaker a stake in the combined company.