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EU Set to Approve Fiat Chrysler's Merger With Peugeot, a Report Says

By John Rosevear – Updated Oct 26, 2020 at 10:23AM

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It's the last major hurdle for the $38 billion merger plan.

Fiat Chrysler Automobiles (FCAU) and French automaker Peugeot (PUGOY), often called the PSA Group, will soon win European Union approval to merge, Reuters reported on Monday, citing people close to the matter. 

The merged company will be the world's fourth-largest automaker with a market capitalization of roughly $38 billion. It will take the name Stellantis, from the Latin verb stello, meaning "to brighten with stars." 

FCA and Peugeot first announced their plan to merge in late 2019. The all-stock deal will unite FCA's Fiat, Jeep, Dodge, Ram, Maserati, and Alfa Romeo brands with PSA's Peugeot, Opel, DS, and Citroen. This will allow for about $6 billion per year in cost reductions due to economies of scale, the companies say. 

The two CEOs are shown shaking hands in front of a table.

Peugeot CEO Carlos Tavares, at left, and Fiat Chrysler CEO Mike Manley announced the merger deal in December of last year. Image source: PSA Group.

The cost reductions are seen as crucial in an era in which automakers are spending huge sums to develop electric vehicles and advanced driver-assist systems. Although the merger was announced before the coronavirus pandemic, the COVID-19 economic disruptions in North America and Europe have strengthened the case for the deal, the companies say. 

The promised cost reductions do not involve closing factories. Both companies have said that all of their current factories will remain operational following the merger. 

The approval from the European Union is the last remaining significant hurdle for the merger plan. Once approved, the companies expect to complete the merger in early 2021.

FCA and Peugeot sold a combined 7.9 million vehicles in 2019, generating a total of 182.7 billion euros ($216 billion) in revenue. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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