Fiat Chrysler proposed a merger with Renault on 27 May 2019 and withdrew the offer on 6 June, after the French state asked for more time to vote on it. What the case shows about state shareholders.
On 27 May 2019, Fiat Chrysler Automobiles (FCA) sent Renault’s board a non-binding letter proposing to merge the two groups. Ten days later, in the early hours of 6 June, it withdrew the proposal with immediate effect. The deal, which would have created the world’s third-largest carmaker, has ended without Renault’s board reaching a decision.
What FCA proposed
The merger was framed as a 50–50 deal: FCA and Renault shareholders would own a new parent company in equal parts, listed in Milan, Paris and New York. The board would have eleven members, with a majority of independents; FCA and Renault would nominate four each and Nissan one. Together they would sell 8.7 million vehicles a year, and FCA estimated annual savings of more than €5 billion, mainly from working together on products and regions, with electrification, connectivity and autonomous driving as key areas, and without plant closures.
Renault said it would study the proposal with interest. Its board met on Tuesday 4 and Wednesday 5 June without reaching a decision.
What happened on 5 and 6 June
According to the financial press, the French state, which holds 15% of Renault and is its largest shareholder, asked to postpone the vote to allow time to secure the support of Nissan, whose representatives on the board were going to abstain. That night FCA’s board, chaired by John Elkann, resolved to withdraw the proposal and said that the political conditions in France did not exist at that moment for such a merger to succeed.
Renault said it regretted not being able to continue and that it valued Nissan’s constructive approach; both FCA and Renault blamed the French government for the failure. On 9 June the financial press reported contacts about reopening the dialogue, although a senior official at the French economy ministry said the proposal was gone.
A state shareholder and an alliance
Renault is not an ordinary company: the French state owns 15% of its capital, and the company in turn owns 43.4% of Nissan, while Nissan holds 15% of Renault without voting rights. This web of holdings, strained since the arrest of Carlos Ghosn at the end of 2018, meant that a Renault merger in practice needed the approval of the French state and of Nissan as well as of its own board.
The case illustrates what happens when a state is a significant shareholder: it may defend interests other than purely financial ones, such as jobs, factories or the balance with the partners in an alliance, and its timetable does not always match that of an offer. FCA did not want to wait and withdrew its own.
For a family-owned or mid-sized company considering a merger or a sale, the lesson is practical: before negotiating it is worth identifying who really decides — directors, reference shareholders, alliance partners or public authorities — and what timetable and conditions each of them needs. It is also worth checking what shareholder agreements and the articles of association say about vetoes, qualified majorities and voting rights, because these do not always follow the capital. A public proposal with a tight timetable leaves little room when the support of any of them is missing.
In a merger, the timetable is set by whoever has to give the final yes.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
