By on December 18, 2019

Regulatory and shareholder approvals will take some time, but the pending merger between Fiat Chrysler and France’s PSA Group is now chiseled in stone. The two automakers signed a binding combination agreement on Wednesday, positioning their respective companies for a 50:50 tie-up and the creation of the world’s third-largest automaker (by revenue).

Going by sales would make it the fourth-largest.

The move comes after the French government, which owns 12 percent of PSA, gave the deal ther green light, with the Peugeot family offering its own thumbs-up.

Headquartered in The Netherlands, the combined entity — once fully meshed — will span the globe, drawing 46 percent of its revenue from Europe and 43 percent from North America. The companies are aiming for $4.1 billion in annual savings achieved through platform and technology sharing, with two vehicle platforms (small and compact/midsize) expected to account for two-thirds of its volume.

One-time costs associated with the merger total $3.1 billion.

Broken down, FCA and PSA see tech- and platform-related synergies as making up 40 percent of the combined entity’s cost savings, with another 40 percent derived from purchasing. Marketing, IT, and logistics will make up the remaining 20 percent.

Helming the whole operation will be PSA CEO Carlos Tavares, who’ll hold a seat on the 11-person board. Term length is five years. In the group chairman seat is FCA Chairman John Elkann. The agreement stipulates that no shareholder will be able to exercise more than 30 percent of the votes cast at the entity’s shareholder meetings.

“Carlos Tavares, Mike Manley and their executive teams have a strong track record in successfully turning around companies and combining OEMs with diverse cultures,” the automakers said in a joint statement. “This experience will support the speed of execution of the merger, underpinned by the companies’ strong recent performances and already robust balance sheets. The merged entity will maneuver with speed and efficiency in an automotive industry undergoing rapid and fundamental changes.”

Key to ensuring French support for the deal was the assurance that no assembly plants would be mothballed as a result of the merger; both companies anticipate positive cash flow starting in Year One.

In a letter to employees seen by Reuters, FCA CEO Mike Manley told employees to remain focused on the business of selling Jeeps and Rams, saying, “We have aggressive goals and high expectations to meet as FCA well into 2020. Let’s deliver them all.”

He added that the binding agreement signed Wednesday kicks off “an extended process of regulatory and shareholder approvals which could take from 12 to 15 months.”

[Image: Fiat Chrysler Automobiles]

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