Fiat and Renault Is Hardly a Merger of Equals
The Italian company is effectively offering a 10 percent premium for the French carmaker.
John Elkann will probably keep the chairmanship.
Photographer: Charles Coates/Getty Images EuropeFiat Chrysler Automobiles NV has a generous view of what defines a merger of equals. Its proposed combination with French rival Renault SA contains a premium. The top-up is a sign that any aspiring partner for Renault needs to show that it disagrees with the market’s dim view of the company’s worth.
The Italian suitor was capitalized at 17.8 billion euros ($19.9 billion) on Friday before its ambitions emerged, while its putative partner was worth 14.8 billion euros. Crunch the pair together at no premium and Renault shareholders would own less than half of the group, and of the value created from a merger. That wouldn’t fly in Paris. Any deal between these national icons must be seen to divide the spoils equally. What’s more, a transaction can’t look like an Italian takeover. The politics are too sensitive.