The board of Fiat Chrysler Automobiles approved a merger with PSA Group of France to create the world’s fourth-biggest auto manufacturer, people familiar with the situation said.
Fiat Chrysler’s board met late Tuesday to consider the deal, following the unanimous endorsement by PSA’s board earlier, said the people, asking not to be identified discussing confidential matters. The companies are expected to announce the signing of a binding memorandum of understanding before the opening of equity markets in Europe on Wednesday, the people said.
PSA and Fiat Chrysler representatives declined to comment.
The merger would forge a regional powerhouse to rival Germany’s Volkswagen Group and have a stock-market value of about $46 billion -- surpassing Ford Motor Co. The tie-up would also bring together two auto-making dynasties, the billionaire Agnelli clan of Italy -- led by Fiat Chairman John Elkann -- and the Peugeots of France.
When the two companies revealed their merger discussions six weeks ago, they sketched out a plan for a 50-50 Netherlands-based holding company led by PSA CEO Carlos Tavares, with Elkann as chairman. According to the deal approved by PSA board on Tuesday, FCA's robot unit Comau will remain within the combined group rather than being spun off as was originally planned in October, people familiar with the matter told Reuters.
Both groups will then jointly decide how to extract value from Comau, Reuters reported.
The group will include the Fiat, Jeep, Dodge, Ram, Chrysler, Alfa Romeo, Maserati, Peugeot, Citroen, DS, Opel and Vauxhall brands, allowing it to serve mass and premium passenger car markets as well as those for trucks and light commercial vehicles.
The combination will give Peugeot-maker PSA a long-sought presence in North America and should help Fiat gain ground in developing low-emission technology. Yet it doesn’t fix all of the their shortcomings, Juergen Pieper, an analyst at B. Metzler Seel Sohn & Co. told Bloomberg Television on Tuesday.
The combined business will still lack “very good premium brands” as well as “a good position in China,” he said.
PSA and Fiat have been in talks on and off for months, and were exploring a partnership to share investments and build cars in Europe as early as March, Bloomberg reported at the time.
Reuters contributed to this report.