Published: Thu, June 06, 2019
Markets | By Otis Pena

FCA withdraws from proposed merger with Renault because of French politics

FCA withdraws from proposed merger with Renault because of French politics

It comes as Fiat Chrysler's proposed merger with Renault SA collapsed late Wednesday after Renault's board failed to approve the deal and Fiat withdrew its offer.

"In a statement, FCA representatives said: "[Bigland's] eligibility for incentive compensation - like that of all corporate officers - is subject to a determination by the Board of Directors' compensation committee that he has satisfied the applicable company and personal performance conditions".

After six hours of talks between the two companies at Renault's headquarters in Paris, Renault said it "was unable to take a decision due to the request expressed by the representatives of the French state to postpone the vote to a later council".

The French government, Renault's top shareholder, reportedly raised concerns over how the merger would align with the carmaker's long-standing alliance with Nissan. Fiat Chrysler stood to gain access to Renault's superior electric drive technology to meet mandates for zero-emission cars.

"With FCA pulling its merger offer, one has to wonder how much the French state is set on limiting Renault's strategic and valuation opportunities despite having only a 15% stake", analysts at brokerage Jefferies wrote in a note to clients.

The French government owns 15% of Renault and had been seeking job and investment assurances and a seat on the merged entity's board. FCA and Renault together would make 8.7-million vehicles a year, put it third, behind Volkswagen and Toyota and ahead of General Motors.

Criticism of Fiat's May 27 proposal has gathered steam in recent days.

But the French official said it generally welcomes the deal as a win for both Renault and Fiat Chrysler, because each has strengths the other lacks.

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If Renault's board says "yes" to Fiat Chrysler, that would open the way for a non-binding memorandum of understanding to start exclusive merger negotiations.

Fiat Chrysler said in its statement that it remained "firmly convinced of the compelling transformational rationale of a proposal", noting it had been widely well-received in markets and in the industry and would have delivered benefits to all parties.

While Nissan was not specifically part of the merger proposal between FCA and Renault, the French company apparently thought Nissan's support was crucial to the success of the overall deal.

The automaker adds that it will continue to focus on its existing commitments "through the implementation of its independent strategy".

The sudden end to the merger talks came after midnight in Paris, after Fiat Chrysler and French government officials had reached a tentative agreement that cleared the way for Renault's board to consider moving forward, people familiar with the situation said.

But Nissan CEO Hiroto Saikawa said Monday the merger "would require a fundamental review of the existing relationship between Nissan and Renault".

French finance minister Bruno Le Maire said on TV that Renault could be bringing former executive boss Carlos Ghosn to court after finding out about €11 million of dubious expenses.

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