PSA Group has secured the backing of one of its major shareholders, the French government, for its plan to merge with Fiat Chrysler Automobiles, according to people familiar with the matter.
The French state, which holds roughly 12 percent in PSA and has board representation, is supporting a binding memorandum of understanding that could be approved this week, said the people, who asked not to be named because the deliberations are private.
PSA directors are scheduled to meet Tuesday to review the terms, which reflect minor changes to an accord unveiled Oct. 31, the people said.
The deal “makes sense in order to build a new champion with global scale to take on the challenges of sustainable mobility,” a French finance ministry official said in a statement Monday.
The carmakers sketched out at the end of October their plan to combine to create a regional powerhouse to challenge Volkswagen. The new company would be based in the Netherlands and headed by PSA CEO Carlos Tavares. Fiat Chrysler Chairman John Elkann would keep his role as chairman.
The deal will turn two mid-sized carmakers into a global giant, with sales of more than 8 million vehicles a year and a stable of brands including PSA’s Peugeot and Citroen and Fiat Chrysler’s Jeep, Alfa Romeo and Ram.
