Fiat Chrysler puts brakes on €33bn Renault merger
Car maker Fiat Chrysler announced on Thursday that it was pulling its €33bn merger proposal with Renault after French government intervention in the deal.
CAC 40
8,022.41
16:59 19/04/24
Fiat Chrysler Automobiles
€12.57
16:25 23/03/23
Renault
€47.73
17:19 19/04/24
FCA said the political conditions in France are not appropriate for such a combination to proceed successfully.
Renault shares tumbled 7% on Thursday morning and shares in FCA were down 3% in Milan.
Renault said its board had been unable to press ahead with the deal because French government representatives had requested a postponement of the vote. The French government holds a stake of more than 15% in Renault. Japan’s Nissan also owns 15%.
The deal would have created the world’s third-largest carmaker after Volkswagen and Toyota with combined sales of 8.7m vehicles a year.
The decision to pull the merger came after the Renault board pushed back a decision for a second time on whether to engage with the all-stock proposal.
The board said the French government, the largest shareholder in the company with 15% stake, requested the delay.
Shares in Japan’s Nissan, the second-biggest shareholder in Renault also fell on Thursday as much as 3.6% in Tokyo trading but rebounded to a 1.3% fall by the early afternoon.
RBC Capital Markets said: "Ultimately, this week has highlighted to the market the unlocked value in Renault stock, and shifted the bargaining power in negotiations with Nissan to Renault. We continue to like the dynamics of a Fiat-Renault combination and would not count that deal out completely. Disappointingly, it highlights the difficulty in getting the French government on board on such a deal."
RBC maintained its 'top pick' rating on Renault, saying it still sees a strong likelihood that the Nissan share value is unlocked - perhaps not as quickly as some had hoped.
"Moreover, Nissan now knows that they are not the only dance partner at the ball for Renault, and that could perhaps push them closer in the Alliance."
CMC Markets analyst David Madden said: "The administration in Paris owns a 15% stake in Renault, and the French government previously backed the proposed tie-up on the condition it protected operations in France. Just because the deal didn’t go ahead, doesn’t mean it won’t resurface. The car sector is under increasing pressure from cheaper manufacturing locations, and the rise of electric vehicles. Renault and Fait Chrysler would benefit from pooling resources, and in turn keep costs in check."