Fiat Chrysler Automobiles and rival Peugeot maker PSA Group have agreed to binding merger terms that include sweeteners to make the trans-Atlantic tie-up more attractive to U.S. regulators and PSA shareholders.
The two companies said Wednesday they had signed a combination agreement fixing the financial terms of the deal and the corporate governance structure of the combined group. The move marks an important step in solidifying a merger that was announced in October. The tie-up aims to create a $50 billion auto giant that would rank among the world’s largest car companies by sales.
The deal comes at a time of mounting cost pressures in the global car business, with auto companies investing billions in new technologies, such as electric cars, as demand for cars and trucks in the top auto markets weakens.
Among the terms added over the past several weeks were agreements that China’s state-run Dongfeng Motor Group would sell part of its 12.2% stake in PSA back to the French car maker and that Fiat Chrysler would spin off its Comau division after the deal.
The transaction—expected to close in the next 12 to 15 months—will create a car maker selling 8.7 million vehicles a year with revenues of nearly €170 billion ($189 billion), the companies said. The merger won’t result in any plant closures and will lead to annual cost savings of some €3.7 billion euros a year, they added. The merged company’s name is so far undecided.
“The challenges of our industry are really, really significant,” PSA Chief Executive Carlos Tavares said. “We are doing this because we believe that we will be stronger to face the future challenges of our industry than alone.”
