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Fiat Chrysler, Peugeot Owner PSA Approve $50 Billion Merger Deal

The boards of French car manufacturer PSA, the owner of Peugeot, and Fiat Chrysler in separate meetings Tuesday permitted a binding deal for a $50 billion merger, sources stated.

The two mid-sized car manufacturers declared programs six weeks ago for a tie-up to create the world’s No. 4 car manufacturer and reshape the global industry. The binding is seen helping them address challenges in the trade, including a worldwide downturn in demand and the requirement to develop costly cleaner vehicles to meet looming anti-air pollution rules.

A source close to FCA had stated before the two firms might officially declare the settlement early Wednesday, followed by a conference call to explain additional details later in the day.

China’s Dongfeng Motor Group, which has a 12.2% equity stake in PSA, will have a reduced stake of about 4.5% in the merged organization, two sources stated, in a step that would help make regulatory permissions easier.

According to the deal accredited by PSA’s board Tuesday, FCA’s robot subsidiary, Comau, will remain inside the combined group rather than be spun off as was initially planned in October, the sources stated.

Ahead of the meetings, entities representing the Peugeot family, Etablissements Peugeot Freres and FFP, unanimously accredited an intended memorandum of understanding for the planned binding, a source conversant with the matter stated.

That would put it fourth globally behind Volkswagen, Toyota Motor Corp, and the Renault-Nissan association. It was merely six months ago that FCA deserted merger discussions with PSA’s French competitor Renault.