The boards of French carmaker PSA Group and Italian American rival Fiat Chrysler Automobiles NV have approved a preliminary plan to merge, according to a joint statement, creating a combined automaker that would rank among the world's largest.

Under the proposal, shareholders of each company would own 50 percent of the combined entity, the statement said.

Fiat investors would receive a dividend of €5.5 billion (¥665 billion), while PSA would distribute its stake in auto parts maker Faurecia SE, worth about €3.7 billion, to shareholders, according to the release.