Fiat Chrysler is seeking a merger with Renault that is valued at more than $35 billion, according to Reuters.
Although shares rose for both companies, the deal comes with complications, including the French government’s role as the biggest shareholder for Renault and existing ties between Renault and Nissan, Reuters noted.
{mosads}“The market will be careful with these synergy numbers, as much has been promised before and there isn’t a single merger of equals that has ever succeeded in autos,” Evercore ISI analyst Arndt Ellinghorst told Reuters.
Fiat is reportedly proposing an all-share “merger of equals” in which a 2.5-billion euro dividend would first be paid to current Fiat shareholders, after which investors in each company would receive half of the final institution.
Current Renault Chairman Jean-Dominique Senard would likely become CEO of the new entity, with John Elkann, head of the Angelli family, which controls 29 percent of Fiat, serving as its chairman, according to Reuters, which cited sources familiar with the talks.
Italian Deputy Prime Minister Matteo Salvini said avoiding any job or budget cuts to the new entity would be essential, Reuters noted. A lawmaker from Salvini’s League party added that the Italian government may seek a stake in the new entity to balance out France’s stake.
The deal could take over a year to finalize, Fiat CEO Mike Manley said in a letter to employees seen by the news service.
Fiat is currently highly profitable in North America. But in Europe, where most of its plants are running under 50 percent capacity, the automaker lost money last quarter, with new European Union emissions curbs likely to add to its woes.
Renault, meanwhile, has no business in the U.S. but has been a trailblazer in electric car and fuel-efficient technologies.
“The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry,” Fiat said, according to Reuters.