Business / Corporate

France presses for concessions from Fiat in Renault merger proposal

Bloomberg

The French government, Renault SA’s biggest shareholder, wants additional guarantees from Fiat Chrysler Automobiles NV in its proposal to merge the two carmakers as it seeks to avoid job cuts in France and protect national interests, according to sources familiar with the matter.

Fiat Chrysler Chairman John Elkann was in Paris over the weekend to discuss the deal, according to the sources, who asked not to be named because the talks are confidential.

He met with French Finance Minister Bruno Le Maire, who said last week he wants guarantees on preserving jobs, a ministry spokesman said. Fiat Chrysler, which has promised not to close plants, is open to minor adjustments to its plan, the sources said.

A spokesman for the French Finance Ministry said Le Maire spoke to Elkann on Friday before the two met again Saturday, and the minister saw Renault Chairman Jean-Dominique Senard on Sunday night. There’s a consensus on the 50-50 ownership structure, the spokesman said. The ministry is still working on the details, he added.

France is seeking operational headquarters of the combined company in Paris, and a special dividend for shareholders of Renault, which owns a 43 percent stake in alliance partner Nissan, as well as a French government seat on the new company’s board, the ministry spokesman said.

He said Le Maire is also seeking guarantees on the mandate of Senard, who has been tapped to be chief executive officer of the combined company. Le Maire’s office wants Senard to stay in the role for at least four years, one of the sources said.

Representatives for Renault and Fiat Chrysler declined to comment.

Fiat last week proposed a merger with Renault, structuring the ownership as 50-50 through a Dutch holding company. The deal would add scale to help both companies share costs and resources while tackling an expensive shift to electrification and autonomous driving.

Renault shareholders including the French government, which owns a 15 percent stake, would get an implied premium of about 10 percent, while Fiat owners would get dividends to account for its higher equity value. Together, the companies had a market capitalization of about €33.6 billion ($37.5 billion) as of Friday.

Nissan Motor Co., Renault’s 20-year alliance partner, is not part of the proposal. Its capital is valued at about $28.6 billion. Mitsubishi Motors Corp. is the other member of the alliance, which has been strained by the fallout from the arrest of its leader, Carlos Ghosn, in Tokyo last November.

Criticism has emerged in France since the deal was announced, with newspaper Le Monde editorializing over conflicts in the role of banker Societe Generale SA as a Fiat shareholder and Renault adviser.

Patrick Pelata, a former COO at Renault, said he doubted whether the €5 billion in annual synergies announced by Fiat and Renault could be achieved, and warned the deal could hurt Renault’s alliance with Nissan.