MILAN (Reuters) - The boards of French carmaker PSA (PEUP.PA), the owner of Peugeot, and Fiat Chrysler (FCHA.MI) (FCA) in separate meetings on Tuesday approved a binding agreement for a $50 billion merger, sources said.
The two mid-sized carmakers announced plans six weeks ago for a tie-up to create the world’s No. 4 carmaker and reshape the global industry. A merger is seen helping them deal with big challenges in the industry, including a global downturn in demand and the need to develop costly cleaner cars to meet looming anti-pollution rules.
Both companies declined to comment.
A source close to FCA had said earlier the two companies could formally announce the agreement early on Wednesday, followed by a conference call to explain further details later in the day.
China’s Dongfeng Motor Group Co Ltd (0489.HK), which now has a 12.2% equity stake in PSA, will have a reduced stake of around 4.5% in the merged group, two sources said, in a move that could help make regulatory approval easier.
According to the deal approved by PSA’s board on Tuesday, FCA’s robot unit, Comau, will remain within the combined group rather than be spun off as was originally planned in October, the sources said.
The new group will evaluate how to extract value from Comau.