Automaker Amalgamations
Fiat Chrysler (FCA) and Peugeot will be two in the same company. Their combined might in a new mega-merger could make for the 4th largest car maker in the world!
With consumer trends drifting towards autonomous, shared, connected, and electric vehicles, these companies can’t make best-selling cars with their eyes closed anymore. They’ve been thrown into a tech sector, and are struggling with rising costs and slowing demand. Investors on both sides are hoping that in this merger, two negatives make a positive, as individual strugglers adopt the ‘better together’ approach!
There are about four-billion-dollars of sense to co-opetition in this way, with that much forecast in cost savings from an alliance. FCA investors get the better end of the deal, however. Peugeot’s modern vehicle platform helps to curb CO2 emissions, and it could come in handy for FCA, which is racking up hundreds of millions in anti-pollution fines.
The Italian automaker is also flattered by the merger terms! To engineer a half Fiat, half Peugeot consolidation, insiders have declared Fiat’s market value 32% higher than everyone thought it was at the close on Wednesday. Fiat fans, who also get a special dividend out of this, bid shares up by 11% yesterday. However, the premium is paid by Peugeot, which has been driven down 13% in the markets.
To get this merger over the line, some paperwork needs approving. Authorities Paris have stepped in front of FCA’s merging life before. Earlier this year, the company was told to stay loyal to its current partner, Nissan, and not combine with Renault. Regulators in Rome also have their demands, but it’s not clear how much of a fight they’ll put up against investors this time around!
