Fiat Chrysler Automobiles has officially announced the withdrawal of its merger proposal to Renault.
The 50-50 merger proposal was just announced last week, but FCA has decided to withdraw the proposal immediately. FCA’s release states:
The Board of Fiat Chrysler Automobiles N.V. (“FCA”) (NYSE: FCAU / MTA: FCA), meeting this evening under the Chairmanship of John Elkann, has resolved to withdraw with immediate effect its merger proposal made to Groupe Renault.
FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties. However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.
FCA expresses its sincere thanks to Groupe Renault, in particular to its Chairman and its Chief Executive Officer, and also to the Alliance partners at Nissan Motor Company and Mitsubishi Motors Corporation, for their constructive engagement on all aspects of FCA’s proposal.
FCA will continue to deliver on its commitments through the implementation of its independent strategy.
While FCA cites “political conditions in France” as the reason, the Wall Street Journal claims Renault’s alliance partner Nissan wouldn’t back the deal. A report last week stressed Nissan’s leverage in the deal.
Two Nissan representatives on Renault’s board reportedly planned to abstain from the vote, which cast some concerns on Nissan’s commitment to their existing alliance. A source “close to Fiat Chrysler” told the WSJ:
“If the French tell Nissan ‘We won’t do anything without you,’ then they hold all the cards. You can’t make a merger conditional on Nissan backing it.”
Renault’s top shareholder, the French state, asked to delay the decision. Bloomberg reports Renault’s board was actually on the verge of approving the deal before postponing the decision, which caused FCA to pull out completely.
Whatever the reason may be, the deal is off.
More details may surface in the coming days. But based on these initial reports, it appears that Nissan’s leverage through the Renault alliance — and its perceived reluctance to embrace the FCA merger — may have derailed the entire merger.
In related news, Tesla shorts were suggesting the merger may have resulted in Tesla not receiving its $2 billion in emission credits from FCA. It’s unclear if Tesla actually would have been pushed out of the picture, but it now remains strictly a hypothetical.
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