Fiat Chrysler And Peugeot Sign $50 Billion Merger Deal
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Fiat Chrysler Automobiles and Peugeot S.A. have today signed a binding Combination Agreement providing for a 50/50 merger of their businesses. This merger creates the 4th largest global automotive OEM by volume and 3rd largest by revenue. The proposed combination will be an industry leader with the management, capabilities, resources and scale to successfully capitalize on the opportunities presented by the new era in sustainable mobility.
The combined company will have annual unit sales of 8.7 million vehicles, with revenues of nearly 170 billion Euros, recurring operating profit of over 11 billion Euros and an operating profit margin of 6.6 percent, all on a simple aggregated basis of 2018 results.
The combined entity will have a balanced and profitable global presence with a highly complementary and iconic brand portfolio covering all key vehicle segments from luxury, premium, and mainstream passenger cars through to SUVs and trucks & light commercial vehicles. This will be underpinned by FCA’s strength in North America and Latin America and Groupe PSA’s solid position in Europe. The new Group will have a much greater geographic balance with 46 percent of revenues derived from Europe and 43% from North America, based on aggregated 2018 figures of each company. The combination will bring the opportunity for the new company to reshape the strategy in other regions.
The efficiencies that will be gained from optimizing investments in-vehicle platforms, engine families and new technologies while leveraging increased scale will enable the business to enhance its purchasing performance and create additional value for stakeholders. More than two-thirds of run rate volumes will be concentrated on 2 platforms, with approximately 3 million cars per year on each of the small platform and the compact/mid-size platform.
“Other areas, including marketing, IT, G&A and logistics, will account for the remaining 20%.”
Carlos Tavares, Chairman of the Managing Board of Groupe PSA, said: “Our merger is a huge opportunity to take a stronger position in the auto industry as we seek to master the transition to a world of clean, safe and sustainable mobility and to provide our customers with world-class products, technology and services. I have every confidence that with their immense talent and their collaborative mindset, our teams will succeed in delivering maximized performance with vigor and enthusiasm.”
This technology, product and platform-related savings are expected to account for approximately 40% of the total 3.7 billion Euros in annual run-rate synergies while purchasing – benefiting principally from scale and best price alignment – will represent a further estimated 40% of the synergies. Other areas, including marketing, IT, G&A and logistics, will account for the remaining 20%. These synergy estimates are not based on any plant closures resulting from the transaction. It is projected that the estimated synergies will be net cash flow positive from year 1 and that approximately 80% of the synergies will be achieved by year 4. The total one-time cost of achieving the synergies is estimated at 2.8 billion Euros.
Mike Manley, Chief Executive Officer of FCA said, “This is a union of two companies with incredible brands and a skilled and dedicated workforce. Both have faced the toughest of times and have emerged as agile, smart, formidable competitors. Our people share a common trait – they see challenges as opportunities to be embraced and the path to making us better at what we do.”
Questions & Answers
Q.What will be the combined company's annual sales volume and revenue?
What will be the combined company's annual sales volume and revenue?
The new combined company is projected to have annual unit sales of 8.7 million vehicles. Revenues are estimated at nearly 170 billion Euros, based on aggregated 2018 results for both companies.
Q.Which regions will contribute most to the combined company's revenues?
Which regions will contribute most to the combined company's revenues?
The combined entity will have a strong geographic balance. Based on 2018 figures, 46 percent of its revenues are expected to come from Europe and 43 percent from North America.
Q.How will the combined company achieve the stated synergies?
How will the combined company achieve the stated synergies?
Synergies will primarily come from optimising investments in vehicle platforms, engine families and new technologies, and from purchasing benefits due to increased scale. Marketing, IT, G&A, and logistics will contribute to the remaining efficiencies.
Q.When are the anticipated synergies expected to be fully realised?
When are the anticipated synergies expected to be fully realised?
The estimated synergies are projected to be net cash flow positive from year one. Approximately 80% of these synergies are expected to be achieved by the end of year four.
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