Chrysler Automobiles N.V. has delivered a non-binding letter to the Board of
Groupe Renault proposing a combination of their respective businesses as a
50/50 merger. Groupe Renault has confirmed receipt of a proposal from FCA
regarding a potential 50/50 merger transaction
Board of Directors is meeting currently to discuss this proposal. A press
release will be issued following this meeting. Renault of France already has a
grand three-way alliance with Nissan
Motors and Mitsubishi of Japan.
The FCA and Groupe Renault combination
together with its Nissan and Mitsubishi partners would be the largest global
OEM alliance, selling more than 15 million vehicles annually. The additional
synergies stemming from the merger of FCA and Groupe Renault that are expected
to accrue to Nissan and Mitsubishi purely as members of the Alliance are
estimated to be worth an incremental €1 billion annually.
based on FCA and Groupe Renault’s 2018 global sales, the combined company would
be #4 in North America, #2 in EMEA and #1 in Latin America and would have the
increased resources necessary to grow its footprint in the APAC region. On a
simple aggregated basis of 2018 results, the combined company’s annual revenues
would be nearly Euros 170 billion with operating profit of more than Euros 10
billion and net profit of more than Euros 8 billion.
FCA proposal follows initial operational discussions between the two companies
to identify products and geographies where they could collaborate, particularly
as they develop and commercialise new technologies. These discussions made
clear that broader collaboration through a combination would substantially
improve capital efficiency and the speed of product development. The case for
combination is also strengthened by the need to take bold decisions to capture
at scale the opportunities created by the transformation of the auto industry
in areas like connectivity, electrification and autonomous driving.
proposed combination would create a global automaker, preeminent in terms of
revenue, volumes, profitability and technology, benefitting the companies’
respective shareholders and stakeholders. The combined business would sell
approximately 8.7 million vehicles annually, would be a world leader in EV
technologies, premium brands, SUVs, pickup trucks and light commercial vehicles
and would have a broader and more balanced global presence than either company
on a standalone basis.
benefits of the proposed transaction are not predicated on plant closures, but
would be achieved through more capital efficient investment in common global
vehicle platforms, architectures, powertrains and technologies. FCA has a
history of successfully combining OEMs with disparate cultures to create strong
leadership teams and organizations dedicated to a single purpose. Therefore,
FCA’s Board strongly believes that this combination, which would have the
scale, expertise and resources to navigate the rapidly changing automotive
industry, would create new opportunities for employees of both companies and
for other key stakeholders.
the terms of the proposal, shareholders in each company would receive an
equivalent equity stake in the combined company. The combination would be
carried out as a merger transaction under a Dutch parent company. The Board of
the combined entity would initially be composed of 11 members, with the
majority being independent and with equal representation of four members each
for both FCA and Groupe Renault, as well as one nominee from Nissan. Further,
there would be no carryover of existing double voting rights. However, all
shareholders would have the opportunity to earn loyalty voting rights from the
completion of the transaction under a loyalty voting program. The parent
company would be listed on the Borsa Italiana (Milan), Euronext (Paris) and the
New York Stock Exchange.
benefits flowing from the combination of the two businesses would be shared,
50% by current FCA shareholders and 50% by current Groupe Renault shareholders.
Before the transaction is closed, to mitigate the disparity in equity market
values, FCA shareholders would also receive a dividend of Euros 2.5 billion. In
addition, prior to closing, there would
be a distribution of Comau’s shares to FCA’s shareholders or an incremental Euros 250 million dividend if the Comau
spin-off does not occur.
the businesses will bring together complementary strengths. The combination
would create a brand portfolio that would provide full market coverage with a
presence in all key segments from luxury/premium brands, such as Maserati and
Alfa Romeo, to the strong access brands of Dacia and Lada, and would include
the well-known Fiat, Renault, Jeep and Ram brands as well as commercial
vehicles. Groupe Renault has a strong
presence across Europe, Russia, Africa and Middle East, while FCA is uniquely
positioned in the high margin segments in North America and is a market leader
in Latin America. FCA’s evolving capability in autonomous driving, which
includes partnerships with Waymo, BMW and Aptiv, is complemented by Groupe
Renault’s decade of experience in EV technology where it is the highest selling
EV OEM in Europe. Groupe Renault also has a well-established and profitable
financing business (RCI Banque).
combination would be highly value accretive for both FCA and Groupe Renault
shareholders, delivering in excess of Euros 5 billion of estimated annual run
rate synergies, incremental to existing Alliance synergies. These synergies
would arise principally from the convergence of platforms, the consolidation of
powertrain and electrification investment and the benefits of scale. FCA
estimates based on its experience, that approximately 90% of synergies would
come from purchasing savings (~40%), R&D efficiencies (~30%), and
manufacturing and tooling efficiencies (~20%). Included in these estimated
savings would be the potential to reduce the combined number of vehicle
platforms by approximately 20% and engine families by approximately 30%. The
full run rate of estimated synergies is expected to be achieved by the end of year
six following closing, with about 80% achieved in year four. Taking into
account the impact of the approximately Euros 3-4 billion in cumulative
implementation costs, it is estimated that the synergies would be net cash flow
neutral in year one and positive from year two onward.
the proposal focuses on a combination of FCA and Groupe Renault, FCA looks
forward – as part of a combined enterprise with Groupe Renault – to working
with Groupe Renault’s Alliance partner companies on ways to create additional
value for all Alliance members. FCA recognizes the standing and achievements of
Groupe Renault’s partners and sees significant expected benefits to all parties
from the expanded partnership
proposal offers the opportunity to create the #3 global automotive company with
broad, complementary and strong brand and geographic presence and important
strengths in transforming technologies. It also confirms and enhances the value
of the existing Alliance and its potential to become even stronger in the
future. While there is no certainty that this proposal will result in a
transaction, the Board of FCA has strongly supported and approved the proposal
which will now be reviewed by the Groupe Renault Board of Directors. The
definitive agreements for the proposed combination are subject to negotiation
and to final review and approval by the FCA and Groupe Renault Boards. Completion
of the proposed combination would also be subject to customary closing
conditions, including approval by each company’s shareholders, as applicable,
and the satisfaction of antitrust and other regulatory requirements.
FCA / Renault
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