Fiat Chrysler makes merger offer to Renault

Credit: REUTERS/Rebecca Cook

By Giulio Piovaccari and Laurence Frost

MILAN/PARIS, May 27 (Reuters) - Fiat Chrysler FCHA.MI has made a "transformative" all-share merger proposal to French rival Renault RENA.PA, the Italian-American carmaker said on Monday, in a deal to create a new third-ranked global manufacturer.

The FCA proposal, finalised in overnight talks with Renault, was being discussed at a meeting of the French group's board early on Monday.

The deal would create a carmaker selling 8.7 million vehicles a yearwith a strong presence across key regions, automotive markets and technologies, generating 5 billion euros ($5.6 billion) in annual savings, FCA said in a statement.

The "broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream", it said.

The proposed deal would merge the two carmakers under a listed Dutch holding company. After payment of a 2.5 billion- euro special dividend to FCA shareholders, each group would receive 50 percent of the combined entity in new stock.

Pressure for consolidation among carmakers has grown with the challenges posed by electrification, tightening emissions regulations and expensive new technologies being developed for connected and autonomous vehicles.

($1 = 0.8922 euros)

(Additional reporting by Sudip Kar-Gupta Editing by David Goodman and Georgina Prodhan)

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