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Fiat Chrysler Automobiles NV and PSA Group will get shareholders to sign-off a deal that has endured two years of extraordinary drama.

Negotiations have been marked by on and off talks regarding the transformation of their companies, while the global pandemic also shaped forecasts along the line.

The two companies overcame plentiful and prodigious hurdles to get the deal across the line, with Fiat even managing to patch things up after a short-lived attempt to join forces with PSA’s arch-rival, Renault SA.

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What this means

It is expected that the deal responds to growing pressure to pool resources together for product development, manufacturing and purchasing, to free up money for big bets on electric cars and self-driving systems.

With the merger resembling Volkswagen AG and Toyota Motor Corp, Fiat Chrysler and PSA executives expect this merger to deliver greater resources to compete with electric-car upstarts and tech-industry interlopers, which may boost returns.

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Despite the advantages, there may be challenges once the deal is done.

Being bigger doesn’t spell success, GM has retrenched from many markets to focus on North America and China; while Renault and its alliance partner, Nissan Motor Co. are restructuring after racking up huge losses. Tesla Inc. is now far more richly valued than VW, which is staging the biggest effort among the incumbents to electrify its vast fleet.

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Stellantis will be an amalgam of model lines with enviable positions in certain segments and areas of the world, but neither company has much of a foothold in the luxury-car business or China’s vast auto market.

Recall that the merger of Fiat with Chrysler did little to improve the fortunes of the Alfa Romeo and Maserati luxury lines, while PSA’s purchase of Opel only made the company more reliant on Europe’s crowded and shrinking market.

Carlos Taveres, the CEO of PSA, thus, have much to do in terms of shaking up Stellantis’s portfolio.

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What they are saying

According to Jefferies Analyst, Philippe Houchois,

“Stellantis will be a sort of conglomerate of brands, some great and some not so good and most very regional. The merger will be a good opportunity for a reset. The auto industry has been chasing size and consolidation for years, but it’s been slower in coming than many would like to see. The question is whether GM, Toyota and Renault-Nissan have provided evidence that there may be limits to this strategy.”

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What you should know about the merger The combined company will have presence in North America’s lucrative truck and SUV segments, thanks to Fiat Chrysler’s Ram and Jeep divisions. PSA’s revitalized Peugeot and Citroen brands have excelled in Europe and are the envy of its turnaround-minded French foe, Renault.Fiat Chrysler shareholders are being paid a pre-merger dividend of 2.9 billion euros ($3.6 billion).The boards of both companies also are considering a potential distribution of 500 million euros to each company before they close the deal, or 1 billion euros afterward to shareholders of the combined entity.The Agnelli family that controls Fiat Chrysler, led by Chairman John Elkann, agreed in September to shave 2.6 billion euros off the initial dividend the carmaker’s shareholders will receive, to give Tavares more cash to work with when he takes the helm of Stellantis.Fiat Chrysler and PSA raised their estimate for the annual synergies Stellantis will achieve to 5 billion euros, putting more pressure on Tavares to squeeze out efficiencies. The companies had previously said they would be able to extract 3.7 billion euros in yearly savings without closing any plants.PSA Group is a French multinational manufacturer of automobiles and motorcycles. With its three world-renowned brands, Peugeot, DS and Citroën.

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Source: Nairametrics

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