By Laurence Frost
PARIS (Reuters) - Fiat Chrysler is discussing a Renault (PA:RENA) special dividend and stronger job guarantees in a bid to persuade the French government to back its proposed merger between the carmakers, sources close to the discussions said.
The improved offer, if formalized and accepted, would also see the combined company's operations headquartered in France and the French state granted a seat on its board, two people with knowledge of the matter told Reuters on Sunday.
FCA spokeswoman Shawn Morgan declined to comment. The French government, Renault's biggest shareholder with a 15 percent stake, also declined to comment. A Renault spokesman did not return calls and messages seeking comment.
Italian-American FCA is engaged in intensive discussions with Renault and the French government over the $35 billion merger proposal it pitched last Monday to create the world's third-biggest carmaker.
The concessions being discussed are not definitive and depend on other aspects of an emerging compromise deal, both sources cautioned.
They nonetheless increase the chances that the merger plan will be approved by Renault's board, on which the French state has two seats. The board meets again on Tuesday.
Some analysts and French industry leaders had voiced doubts about the 5 billion euros ($5.6 billion) in claimed cost and investment savings, and whether the proposal represents a fair deal for Renault shareholders.
A Renault dividend would improve the valuation in their favor, balancing a 2.5 billion euro proposed dividend to FCA shareholders. The sources did not elaborate on the potential size of a Renault payout.
The merger plan presented on Monday would see the two carmakers acquired by a listed Dutch holding company whose ownership would be split equally between current FCA and Renault shareholders, after special dividend payments.
FCA had proposed locating the combined group's operational head office in a neutral city, most likely London, but has now indicated readiness to base it in the greater Paris area, meeting a key French government demand, both sources said.
The French government is also likely to be granted a seat on the board to reflect its 7.5 percent stake in the merged company, the people said.
Nissan, whose matching 15 percent stake in its French alliance partner will also be diluted to 7.5 percent of the new group, receives a board seat under the plan unveiled on May 27.
Guarantees to maintain Renault's French blue-collar jobs and industrial sites would also be extended to four years from the two initially proposed under the compromise being discussed, the sources added.
Both France's pro-business government and Italy's populist administration back the merger in principle but fraught relations between the two could yet derail the deal if one side feels disadvantaged.