Fiat Chrysler Automobiles NV (NYSE:FCAU) and PSA Peugeot have announced the terms of their merger deal. Shareholders of each company would own 50% of the new entity, and a binding deal would be finalized within the coming weeks. Fiat shareholders would also be awarded a special one-time dividend worth $6.1 billion as part of the deal.
The merger news came after intensive discussions among the senior managers of the two companies in the last week. This deal will help the two companies to share the huge cost that comes with an industrywide transition to autonomous and electric vehicles. Both companies have so far failed to grow their presence in China.
Carlos Tavares, who is the chief of PSA, is appointed as the CEO of the newly merged entity. He has been one of the top leaders in the auto industry, even by peers such as Jim Farley, who is Ford Motor Company’s (NYSE:F) President of Europe. Tavares’ boasts a remarkable track record, particularly since leaving Renault, to join struggling PSA in 2013. After his association with PSA Group, the company made a strong comeback, recording an operating margin of 8.7% in 1H2019.
Tavares was also responsible for the turnaround of the Opel brand that the PSA group bought from General Motors Company (NYSE:GM) in 2017. As part of the PSA, Opel brand returned to profitability after being stuck in losses for two decades under GM. Now Tavares will look to rebuild Peugeot’s business in the United States, with shipments starting from China or Europe in 2026.
Failed deal with Renault
Earlier this year, Fiat proposed a merger with Renault but later withdrew the deal after the French government asked for concessions. PSA and Fiat had been stated as a logical merger partner because of their complementary geographic and product fit. A combination would lead the new entity to expand in the commercial vehicle industry in Europe. Fiat is having a tough time in Europe with a lack of SUVs and an aging Jeep lineup under its brand.