Official: FCA And PSA Agree To Merge, Create The World’s Fourth Largest OEM

As expected, Fiat Chrysler Automobiles and PSA Group have announced their agreement on combining their respective businesses and, thus, creating the fourth largest OEM in the global automotive industry in terms of global sales.

In a joint statement, the two automakers said they will join forces in a 50/50 merger, with both boards having given the mandate to finalize the discussions in the coming weeks.

The new FCA-PSA unit is expected to achieve around $4.13 billion (3.7 billion euros) in annual run-rate synergies and have a combined market value of around $50 billion, based on current stock prices. The two companies estimate that 80 percent of the synergies would be achieved after four years. Shareholders of each company will own 50 percent of the combined unit .

The Board will be comprised of 11 members, with five of them nominated by FCA, with John Elkann as Chairman, and five nominated by the PSA Group, including the Senior Independent Director and the Vice Chairman. Carlos Tavares will assume the position of Chief Executive Officer for an initial term of five years.

Related: PSA Board Green Lights Negotiations For Merger With FCA

“This convergence brings significant value to all the stakeholders and opens a bright future for the combined entity,” said Carlos Tavares, PSA Group’s CEO. “I’m pleased with the work already done with Mike and will be very happy to work with him to build a great company together.”

“I’m delighted by the opportunity to work with Carlos and his team on this potentially industry-changing combination,” added Mike Manley, FCA’s CEO. “We have a long history of successful cooperation with Groupe PSA and I am convinced that together with our great people we can create a world class global mobility company.”

FCA investors are expected to receive a dividend of $6.1 billion (5.5 billion euros), while PSA will distribute its 46 percent stake in auto parts supplier Faurecia to its shareholders. The new corporate entity will have its headquarters in the Netherlands, with head-office locations in France, Italy and the US.