Wednesday 21 August 2019

Fiat and Renault shares soar on merger approach

On board: Fiat Chrysler Automobiles chairman John Elkann would hold on to the role in any merger. Photo: Bloomberg
On board: Fiat Chrysler Automobiles chairman John Elkann would hold on to the role in any merger. Photo: Bloomberg

Tommaso Ebhardt and Daniele Lepido

Fiat Chrysler has proposed a merger with Renault to create the world's third-biggest carmaker as manufacturers scramble for scale to tackle an expensive shift to electrification and autonomous driving.

The transaction would be structured as a 50-50 ownership through a Dutch holding company, Fiat said yesterday. Renault shareholders, including the French government, would get an implied premium of about 10pc. In a statement, Renault's board said it would study what it called a "friendly" proposal.

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They are moving ahead without Renault's 20-year partner, Nissan, and Mitsubishi, the other member of their troubled alliance, though Nissan would be welcome to join the merged entity later.

The broad strokes of the plan would make Fiat's founding shareholder, the Agnelli family's holding company Exor, the single largest investor in the combined entity. Fiat chairman John Elkann would likely stay in the role while Renault chairman Jean-Dominique Senard would be CEO.

Renault shares surged as much as 16.7pc, while Fiat rose as much as 19.5pc, the most ever. Together, they had a combined market value of about €35bn.

The talks come as carmakers worldwide face intense pressure to spend heavily on new technologies and adapt to trends such as car-sharing.

Falling sales in the world's biggest markets - China, the US and Europe - have brought fresh urgency to consolidate.

Fiat and Renault expect joint annual synergies of more than €5bn, coming from areas such as purchasing power.

"Fiat and Renault are looking for surer footing by gaining scale, and that's not a bad idea for mass-market carmakers," Bankhaus Metzler analyst Juergen Pieper said. "The execution of the deal is a significant hurdle. But on paper, this proposal looks good."

The plan has political backing from the French state, Renault's most powerful shareholder. "We need to have industrial giants in Europe" to compete globally, said spokeswoman Sibeth Ndiaye.

Italian Deputy Premier Matteo Salvini, who initially threatened to intervene, later gave his blessing - and said he trusts the deal "will safeguard every job in this country".

Fiat and Renault went through dramatic changes at the top last year after former Fiat chief Sergio Marchionne died and Carlos Ghosn, who was chairman of the Franco-Japanese alliance, was arrested in Tokyo on charges of financial crimes. Mr Ghosn has denied the accusations.

Bloomberg

Bloomberg

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