06 June, 2019

FCA withdraws from Renault merger

Fiat Chrysler Automobiles (FCA) has reportedly abandoned its proposed merger with French carmaker Renault.

FCA proposed an improved deal earlier this week, reportedly to capitulate to the demands of the French Government.

Despite pledging to have the company’s headquarters in France and giving the French Government a seat on the board, FCA has blamed French politics for the cancelation.

‘It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,’ Fiat Chrysler said in a statement.

The French Government has claimed it would be open to continuing merger talks – despite holding just a 15% stake in Renault, the government seems appears  to have major swaying power.

‘Talks could resume at some time in the future,’ French budget minister Gerald Darmanin told FranceInfo radio on Thursday.

Share prices drop

Since the merger has been called off, the share prices of both of the carmakers have fallen. Renault’s shares have fallen by 7% and FCA’s have dropped by 3% according to Reuters.

‘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.

‘We expect both shares to react negatively but see FCA having wider strategic options and Renault shares more downside risk near-term.’