Talk about a new Fiat Chrysler deal has FCAU stock on its way up Tuesday.
Fiat Chrysler (NYSE:FCAU) has released a proposal letter that has the company seeking to merge with Renault (OTCMKTS:RNSDF). This would have the two companies combining with FCAU and RNSDF shareholders each owning half of the new company.
Fiat Chrysler notes that there would be other things that take place before a deal could go through. This includes FCAU shareholders receiving a €2.5 billion. Comau shares would also be distributed to FCAU shareholders, or there would be an additional €250 million dividend if the spinoff doesn’t take place.
The Fiat Chrysler deal has the potential to bring multiple synergies and benefits to both companies. Among these benefits would be full market coverage of the auto industry. This would have the new company offering vehicles to mainstream customers, as well as those seeking luxury rides.
Another benefit from the possible Fiat Chrysler deal with Renault is that neither of the companies will be closing down any factories. It would also result in the creation of the third-largest OEM in the world with vehicles sales of 8.7 million.
When it comes to the synergies that the Fiat Chrysler deal could provide, it would be a major boon to both companies. FCAU estimates that the merging of the two companies could result in a annual run rate synergies of more than €5 billion.
FCAU stock was up 7% and RNSDF stock was up 9% as of Tuesday afternoon.
As of this writing, William White did not hold a position in any of the aforementioned securities.