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$35 Billion Merger Proposal From FCA Being Considered With Interest By Renault

$35 Billion Merger Proposal From FCA Being Considered With Interest By Renault
The third biggest automaker was proposed to be created by the merger of Fiat Chrysler and Renault on Modnay based on fairly equal terms that balanced the role and power of each party which would help both the companies to better address the challenges of development costs of new technologies and major regulatory changes.
If the proposed merger ultimately gets passed by shareholders of both the companies, it would offer a tough challenge to rivals including General Motors and Peugeot maker PSA Group. The merger would create a new entity which would be valued over at 35 billion.
Renault said that it considered the proposal of merger from the Italian-American FCA as being friendly and was considering the proposal with interest. 
The new of the merger saw a more than 10 per cent increase in the shares of both the companies as the prospect of increased business with a combined capacity of manufacturing more than 8.7 million vehicles a year excited them. The merger would also create synergies that would save the new entity about 5 billion euros ($5.6 billion) in savings every year.
The merger would also result the new entity being just behind Japan’s Toyota and Germany’s Volkswagen in terms of vehicle output capacity worldwide.
However analysts also issued warnings of concern to the merger because of the current alliance between Renault and Nissan and the role played by the French government in the management of Renault in which it is the largest shareholder. Analysts also are concerned about potential opposition from politicians and workers for any proposed cut backs.
“The market will be careful with these synergy numbers as much has been promised before and there isn’t a single merger of equals that has ever succeeded in autos,” Evercore ISI analyst Arndt Ellinghorst said.
The proposal of merger from FCA comprised of an all share merger and the creation of a new listed Dutch holding company. The investors of FCA would own half of the new entity of which the Agnelli family owns 29 per cent. According to reports, Agnelli family scion John Elkann would most probably chair the new company while the CEO would likely be the current chairman of the Renault Jean-Dominique Senard.
The merger proposal was welcomed by Italian Deputy Prime Minister Matteo Salvini but also said that there might be need for the Italian government to acquire a stake in the new entity to balance the current 15 per cent ownership of the French government in Renault which would become 7.5 per cent in the new entity.
It is also being expected that the 20-year-old alliance between Renault and Nissan would also be significantly impacted by the merger. The partnership between the French and the Japanese auto makers is already strained following the arrest of the former embattled chairman of the Nissan Carlos Ghosn in November last year. There has so far been no comments from Nissan about the proposed merger.
A merger with Renault could take more than a year to finalize, said FCA chief executive Mike Manley in a letter to employees.

Christopher J. Mitchell

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