FCA and PSA agree to merge, John Elkann to be Group Chairman

L-R: Carlos Tavares, Mike Manley

The FCA and Renault merger might not have worked out, but FCA and PSA have signed a binding Combination Agreement for a 50/50 merger of their businesses to create the 4th largest global automotive OEM by volume and 3rd largest by revenue.

The official statement said that the combined company will have annual unit sales of 8.7 million vehicles, with revenues of nearly €170 billion, recurring operating profit of over €11 billion and an operating profit margin of 6.6%, all on a simple aggregated basis of 2018 results.

The merged entity will have a Board comprised of 11 members, the majority of whom will be independent. Five Board members will be nominated by FCA and its reference shareholder (including John Elkann as Chairman) and five will be nominated by PSA and its reference shareholders (including the Senior Non-Executive Director and the Vice Chairman). At closing, the Board will include two members representing FCA and PSA employees. Carlos Tavares will be Chief Executive Officer for an initial term of 5 years and will also be a member of the Board.

John-ElkannJohn Elkann (File Photo, FCA)

The new group’s Dutch-domiciled parent company will be listed on Euronext (Paris), the Borsa Italiana (Milan) and the New York Stock Exchange and will benefit from its strong presence in France, Italy and the US, the statement added.

Under the proposed by-laws of the combined company, no shareholder would have the power to exercise more than 30% of the votes cast at shareholders’ meetings. It is also foreseen that there will be no carryover of existing double voting rights but that new double voting rights will accrue after a 3-year holding period after completion of the merger.

A standstill in respect of the shareholdings of Exor, Bpifrance, Dongfeng Group (DFG) and the Peugeot Family (EPF/FFP) will apply for a period of 7 years following completion of the merger, except that EPF/FFP will be permitted to increase its shareholding by up to a maximum of 2.5% in the merged entity (or 5% at the PSA level) by acquiring shares from Bpifrance and/or DFG and/or on the market. Exor, Bpifrance and EPF/FFP will be subject to a 3-year lock-up in respect of their shareholdings except that Bpifrance will be permitted to reduce its shareholdings by 5% in PSA or 2.5% in the merged entity. DFG has agreed to sell, and PSA has agreed to buy, 30.7 million shares prior to closing (those shares will be canceled). DFG will be subject to a lock-up until the completion of the transaction for the balance of its participation in PSA, resulting in an ownership of 4.5% in the new group.

More details here.

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