Fiat Chrysler Automobiles (NYSE:FCAU) and Peugeot SA have sealed the deal on a merger to create the fourth biggest car manufacturer in the world.
The two companies said on Wednesday that they had signed a “binding combination agreement” to join forces, with the enlarged company expected to sell 8.7mln vehicles a year and generate nearly €170bn.
“The proposed combination will be an industry leader with the management, capabilities, resources and scale to successfully capitalize on the opportunities presented by the new era in sustainable mobility,” the two companies said in a statement.
The pair hope to improve efficiency with larger volumes, which will in turn help to keep up with fast-paced tech advancements in the car industry, including the rise of CO2 regulations and electric vehicles.
A new name is yet to be announced, but the company will be domiciled in the Netherlands, with listings on the Paris, Milan, and New York stock exchanges.
Under the terms of the merger, which is expected to complete within 12-15 months, shareholders of each group will own 50% of the enlarged company.
PSA’s shareholders are set to receive 1.742 shares of the new combined company for each share of Groupe PSA, while FCA shareholders will have 1 share of the new combined company for each share of FCA.
In addition, both companies intend to distribute a €1.1bn ordinary dividend in 2020.