Will the PSA Group accept the defeat and let FCA merge with Renault?

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The Fiat Chrysler Automobiles (FCA) stock price has risen more than 12%, to 12.90 euros, after the announcement of its merger with the French group Renault, and perhaps at the request investors who anticipated a more tasty proposal from the PSA group.

After FCA chief executive Mike Manley said earlier this year that the company would be open to trading that improved its outlook, investors expected a merger or takeover. The preferred candidate was the PSA Group, also French, which had successfully bought the European loss-making subsidiaries of General Motors, Opel and Vauxhall, and oriented them towards profitability.

FCA has proposed a merger with Renault on Monday that would be owned 50% by FCA and 50% by Renault. Renault said it would consider this proposal at a board meeting held today. The French State holds around 15% of Renault's capital.

By combining Renault and FCA, we would get a company producing around 9 million vehicles a year and ranking third behind Volkswagen and Toyota. If we include Renault, Nissan and Mitsubishi alliance partners, combined production would reach nearly 15 million euros and rank first.

Renault's alliance with Nissan is a potential complicating factor because it has recently come under pressure, especially because the Japanese authorities have arrested former CEO Carlos Ghosn, accused of corruption, which he denies. The alliance was already cracking because the Japanese felt they had less influence than their contribution required. Nissan was on the verge of bankruptcy when Renault stepped in to save it, but has since become much more profitable than the French company.

The North-LB investment bank in Hannover, Germany, expected any deal involving FCA involving PSA, and wondered if the alliance with Nissan could be an undue complication.

"The proposal to merge FCA seems already very concrete and it is hardly conceivable that the management of Renault was not involved in advance. However, Renault currently has a lot to do with its alliance partner Nissan, and it is unthinkable that this partnership is abandoned, "said Frank Schwope, an badyst at Nord-LB.

Citi Research badyst, Raghav Gupta-Chaudhary, felt that the FCA-Renault deal would work and that he saw no complicating factor in the Nissan alliance.

"The addition of FCA to the global alliance – Renault + Nissan + Mitsubishi – would add considerable scope, and if this goal can be achieved without complex cross-shareholdings, a point of frustration for both Renault shareholders and Nissan shareholders, we expect this to generate profits, "Gupta-Chaudhary said.

Investment researcher Jefferies also appreciated the look of the deal and asked if PSA could step in.

"FCA is suitable for both Renault and PSA; Governance control and management structure are key considerations, "said Philippe Houchois, an badyst at Jefferies.

Houchois said that if Nissan and Renault failed to agree on suitable terms and the alliance failed, FCA would be an effective substitute.

Schwope, of Nord-LB, said the merger was not only sensible, but that investors had reacted in favor of the right moment to cash Renault shares.

"Given the high investment costs for future technologies such as autonomous driving and electromobility, a merger or close cooperation between FCA and Renault makes perfect sense. Following the euphoria resulting from the merger, Renault shares rose by around 13% to 56.63 euros this morning. We recommend using this price increase to sell the Renault share and sell it, "said Schwope.

If PSA fails to acquire FCA, it could well turn to the purchase of Jaguar Land Rover, a British company in distress belonging to Tata Motors of India.

There had been rumors that a Chinese automaker might be interested in FCA. Some badysts have wondered why Renault wanted to merge with FCA because it was losing money in Europe. US margins are down and huge investments are needed to meet strict environmental regulations in Europe. Last month, FCA announced that it would pay Tesla nearly 2 billion euros ($ 2.2 billion) for credits allowing it to realize its turnover. emission targets in 2020.

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The Fiat Chrysler Automobiles (FCA) stock price has risen more than 12%, to 12.90 euros, after the announcement of its merger with the French group Renault, and perhaps at the request investors who anticipated a more tasty proposal from the PSA group.

After FCA chief executive Mike Manley said earlier this year that the company would be open to trading that improved its outlook, investors expected a merger or takeover. The preferred candidate was the PSA Group, also French, which had successfully bought the European loss-making subsidiaries of General Motors, Opel and Vauxhall, and oriented them towards profitability.

FCA has proposed a merger with Renault on Monday that would be owned 50% by FCA and 50% by Renault. Renault said it would consider this proposal at a board meeting held today. The French State holds around 15% of Renault's capital.

By combining Renault and FCA, we would get a company producing around 9 million vehicles a year and ranking third behind Volkswagen and Toyota. If we include Renault, Nissan and Mitsubishi alliance partners, combined production would reach nearly 15 million euros and rank first.

Renault's alliance with Nissan is a potential complicating factor because it has recently come under pressure, especially because the Japanese authorities have arrested former CEO Carlos Ghosn, accused of corruption, which he denies. The alliance was already cracking because the Japanese felt they had less influence than their contribution required. Nissan was on the verge of bankruptcy when Renault stepped in to save it, but has since become much more profitable than the French company.

The North-LB investment bank in Hannover, Germany, expected any deal involving FCA involving PSA, and wondered if the alliance with Nissan could be an undue complication.

"The proposal to merge FCA seems already very concrete and it is hardly conceivable that the management of Renault was not involved in advance. However, Renault currently has a lot to do with its alliance partner Nissan, and it is unthinkable that this partnership is abandoned, "said Frank Schwope, an badyst at Nord-LB.

Citi Research badyst, Raghav Gupta-Chaudhary, felt that the FCA-Renault deal would work and that he saw no complicating factor in the Nissan alliance.

"The addition of FCA to the global alliance – Renault + Nissan + Mitsubishi – would add considerable scope, and if this goal can be achieved without complex cross-shareholdings, a point of frustration for both Renault shareholders and Nissan shareholders, we expect this to generate profits, "Gupta-Chaudhary said.

Investment researcher Jefferies also appreciated the look of the deal and asked if PSA could step in.

"FCA is suitable for both Renault and PSA; Governance control and management structure are key considerations, "said Philippe Houchois, an badyst at Jefferies.

Houchois said that if Nissan and Renault failed to agree on suitable terms and the alliance failed, FCA would be an effective substitute.

Schwope, of Nord-LB, said the merger was not only sensible, but that investors had reacted in favor of the right moment to cash Renault shares.

"Given the high investment costs for future technologies such as autonomous driving and electromobility, a merger or close cooperation between FCA and Renault makes perfect sense. Following the euphoria resulting from the merger, Renault shares rose by around 13% to 56.63 euros this morning. We recommend using this price increase to sell the Renault share and sell it, "said Schwope.

If PSA fails to acquire FCA, it could well turn to the purchase of Jaguar Land Rover, a British company in distress belonging to Tata Motors of India.

There had been rumors that a Chinese automaker might be interested in FCA. Some badysts have wondered why Renault wanted to merge with FCA because it was losing money in Europe. US margins are down and huge investments are needed to meet strict environmental regulations in Europe. Last month, FCA announced that it would pay Tesla nearly 2 billion euros ($ 2.2 billion) for credits allowing it to realize its turnover. emission targets in 2020.