Fiat Chrysler and Peugeot parent PSA confirm merger talks
Fiat Chrysler and Peugeot owner PSA Group confirmed on Wednesday that they are in merger talks.
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Both companies said "there are ongoing discussions aiming at creating one of the world‘s leading automotive groups".
At 1045 GMT, Fiat Chrysler shares were up 8.9% at €12.79 and PSA shares were 6.4% higher at €26.51.
Earlier this year, Fiat Chrysler abandoned a £28bn merger offer for Renault, pinning the blame on the French government.
Michael Hewson, chief market analyst at CMC Markets, said it's "a remarkable turnaround for PSA who underwent a near death experience back in 2012, after being bailed out in 2009".
"Fiat Chrysler, on the other hand, was only a few months ago exploring a deal with Renault, a deal which collapsed in the summer due to interference from the French government. Renault said it had been unable to proceed with the deal because the French government said a number of its conditions hadn’t been met, including guarantees around jobs, while Renault’s partners Nissan said they needed more time to analyse it.
"Given that the French government also holds a major stake in Peugeot, of 14% it is hard not to see that this attempt by Fiat might well go the same way as the failed Renault attempt earlier this year. Business and government always make uncomfortable bedfellows and despite the synergies a Fiat Chrysler and PSA merger would bring, it is important not to underestimate the political obstacles to a deal."
Olivetree Financial said: "Peugeot and Fiat have held talks in the past and it is widely recognised there is a need for further consolidation within the sector to combat consumer and supply pressures which are pushing the demand and supply curves lower for these businesses. Furthermore there is increasing need to compete in the growing electric car market which requires significant investment.
"The Agnelli family have confirmed there interest in participating in any consolidation proven by their failed Renault merger. It is unclear however whether they would be looking for a merger of equals transaction or a premium considering the relatively smaller geographic scale up the Peugeot business would offer and that they would seek majority control of the Board.
"Anti-trust and shareholder approvals should be straightforward assuming a recommended offer can be agreed. However the political issues that killed the Renault transaction and all present here and a path to deliverability needs to be demonstrated before Fait are likely to repeat the process."