(RTTNews) - Groupe PSA (PEUGF.PK), the owner of the Peugeot and Opel brands, and Fiat Chrysler Automobiles N.V. (FCAU) announced Thursday that they unanimously agreed to work towards a full combination of their respective businesses by way of a 50/50 merger.
Both boards have given the mandate to finalize the discussions to reach a binding Memorandum of Understanding in the coming weeks.
In response to recent media reports on a possible business combination, the companies on Wednesday had confirmed that discussions were going on.
In a statement, the companies now said the new group with global scale and resources would be owned 50 percent by Groupe PSA shareholders and 50 percent by FCA shareholders.
The combination would create the 4th largest global OEM in terms of annual unit sales with 8.7 million vehicles with combined revenues of nearly 170 billion euros.
The significant value accretion resulting from the transaction is estimated to be approximately 3.7 billion euros in annual run-rate synergies.
It is projected that 80 percent of the synergies would be achieved after 4 years. The total one-time cost of achieving the synergies is estimated at 2.8 billion euros.
The transaction would be affected by way of a merger under a Dutch parent company. The Board would be composed of 11 members. John Elkann will be Chairman and Carlos Tavares will be CEO.
Prior to the completion of the transaction, FCA would distribute to its shareholders a special dividend of 5.5 billion euros, as well as its shareholding in Comau.
In addition, prior to completion, Peugeot would distribute to its shareholders its 46 percent stake in Faurecia.
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