Fiat Chrysler and Peugeot owner PSA have agreed on a binding merger in a deal worth $50 billion to pave the way for the world’s fourth largest car maker.
The two companies announced the merger that will reshape the global industry six weeks ago, as car manufacturers worldwide struggle with a decrease in demand.
Car makers also struggle in the costs to release cleaner models as tight emission targets step in.
The merger aims for annual cost savings of up to 3.7 billion euros ($4 billion) through combining technologies and through shared purchasing agreements. It is anticipated to close within 12 to 15 months, according to the auto firms.
Before the merger completes, PSA’s shareholder Dongfeng Motor Group will cut its 12.2% stake on the French car maker by selling 30.7 million shares to PSA.
In the most recent closing price, the said stake is worth 679 million euros ($748.4 million). Dongfeng will have 4.5% of the merged group.
The two companies said that the new company—which is yet to be named—will have an 11-strong board; five of these nominated by PSA and another five by FCA.
Carlos Tavares, currently PSA boss, will become CEO of the merged company for the first five years as well as a seat on the board.
General Motors filed a shock lawsuit against FCA last month on the charges of alleged union bribing, however it did not affect the merger terms. FCA CEO Mike Manley claimed the allegations were “meritless”.
Manley added that he hoped FCA would “dispose of that quickly.” If not, the company would be defending itself vigorously.