Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Here's Why FCAU Withdrew Its Proposal To Merge With Renault

By Zacks Investment ResearchStock MarketsJun 06, 2019 03:08AM ET
Here's Why FCAU Withdrew Its Proposal To Merge With Renault
By Zacks Investment Research   |  Jun 06, 2019 03:08AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The May 27 proposal to merge Fiat Chrysler Automobiles (NYSE:FCAU) with Renault (PA:RENA) was just too good to be true. Not only would the $35 billion deal seen the emergence of the third largest automaker in the world with annual vehicle sales of 8.7 million units, but it would also have allowed the two to manage 5 billion euros in cost synergies (including a billion for Renault’s Japanese partner Nissan) by saving purchasing cost and splitting electric and autonomous car R&D.

With minimal product overlap, FCAU’s popular Jeep and Ram brands also complement perfectly Renault’s leadership in autonomous and electrified vehicles (where FCAU needs a much stronger footing).

But there were challenges right at the outset that proved to be too big to overcome.

The first was with respect to the French government, which has a 15% ownership in Renault.

The second was Renault’s (15% owned by Nissan) alliance with Nissan (40%+ owned by Renault) and Mitsubishi (controlling share owned by Nissan). That’s how complicated it is.

The Problem with the French Government-

The government started out wanting that there should be no job losses in the country, that no French plant should be shut down and that a dividend is paid to Renault shareholders as part of the deal. Later, it started specifying things like the location of the merged company’s headquarters as well as board representation. Plus of course partner Nissan’s active support.

To be fair, some Renault shareholders also had reservations. Paris-based activist investment manager CIAM for instance sent a letter to Renault’s board, saying that the deal significantly undervalued Renault and that its shareholders deserved the 2.5 billion-euro ($2.8 billion) dividend promised to FCAU shareholders.

The Problem with Nissan-

The company is not averse to the deal, as long as it is able to retain some of its EV IP. It would probably also like to raise its stake in Renault so it can have more of a say in the alliance.

The Result

When the proposal was put to vote, all the French directors were in favor. Nissan abstained, likely because of its unsolved issues with Renault. The government voted against the deal because it wanted more time to fly to Japan and convince Nissan’s top brass that it was a good deal.

At about this time, FCAU pulled out, likely because Nissan (and its leadership in EV) was probably an important consideration in the first place. So if it decided to hang on to its IP, the deal didn’t make sense.

So unfortunately, it was left with making a statement to the public:

"FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties… However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully."

"FCA will continue to deliver on its commitments through the implementation of its independent strategy."


FCAU has a Zacks Rank #4 (Sell). Other companies in the space you could buy instead are Geely Automobile Holdings Ltd. (OTC:GELYY) and Tata Motors Ltd. (NYSE:TTM) . Or, check out the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Tata Motors Ltd (TTM): Free Stock Analysis Report

Fiat Chrysler Automobiles N.V. (FCAU): Free Stock Analysis Report

Geely Automobile Holdings Ltd. (GELYY): Free Stock Analysis Report

Original post

Zacks Investment Research
Here's Why FCAU Withdrew Its Proposal To Merge With Renault

Related Articles

Craig Erlam
Record End To The Week By Craig Erlam - Jul 23, 2021

Optimism Builds Into Weekend Stock markets are ending the week on a positive note, with earnings continuing to surprise to the upside and COVID fears being brushed aside as the S&P...

Guy S. Ortmann, CMT
NDX Makes New Closing High By Guy S. Ortmann, CMT - Jul 23, 2021

The major equity indexes closed mixed yesterday, with negative internals on the NSYE and NASDAQ Composite as trading volumes declined on both exchanges from the prior session. The...

Here's Why FCAU Withdrew Its Proposal To Merge With Renault

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email