The boards of Groupe PSA and FCA have, as expected, signed off on their planned merger. The two companies say the new entity will have the leadership, resources and scale to be at the ‘forefront of a new era of sustainable mobility’.
The combined company will be the fourth largest global OEM by volume and 3rd largest by revenue with annual sales of 8.7m units and combined revenues of nearly EUR170bn.
The two companies also say the merger will deliver approximately EUR3.7bn estimated annual run-rate synergies with no plant closures resulting from the transaction. Synergies are expected to be net cash flow positive from year.
The industrial rational is for the bigger combined company to leverage investment efficiency across a larger scale for market solutions and technologies in new energy vehicles, autonomous driving and connectivity. While they say no plant closures will result from the transaction, some long-term adjustment to overall manufacturing capacity and plant-model mix is seen by analysts as inevitable as the two forge collaborations in engineering and product architectures.
They also said there is an excellent working relationship between the two management teams, ‘which share successful track records in turnarounds, value creation and successful OEM combinations’.
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The new company will have John Elkann as Group Chairman and Carlos Tavares as Group CEO, with a majority of independent directors.
The companies said the efficiencies that will be gained from optimizing investments in vehicle platforms, engine families and new technologies while leveraging increased scale will enable the business to enhance its purchasing performance and create additional value for stakeholders. More than two-thirds of run rate volumes will be concentrated on two platforms, with approximately 3 million cars per year on each of the small platform and the compact/mid-size platform.
Completion of the proposed combination is expected to take place in 12-15 months, subject to customary closing conditions, including approval by both companies’ shareholders at their respective Extraordinary General Meetings and the satisfaction of antitrust and other regulatory requirements.
Carlos Tavares, Chairman of the Managing Board of Groupe PSA, said in a statement: “Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services. I have every confidence that with their immense talent and their collaborative mindset, our teams will succeed in delivering maximized performance with vigor and enthusiasm.”
Mike Manley, Chief Executive Officer of FCA, added: “This is a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait – they see challenges as opportunities to be embraced and the path to making us better at what we do.”
