There is no guarantee that the 50-50 merger talks will lead to an agreement. This is understandable, considering the number of players who would potentially be involved in such a partnership. Renault is partly owned by the French government, while its former CEO Carlos Ghosn has been arrested twice since November on allegations of financial misconduct and is awaiting trial. The French company also has a long-standing alliance with Japanese auto giants Nissan and Mitsubishi. On top of this, FCA has a joint venture, PSA (the parent of Peugeot and Citroen)—further evidence that merging the companies would be a mammoth undertaking.
While the talks are reportedly being driven by FCA CEO Mike Manley, there should be little doubt that the company's largest stakeholder, Exor, would be in the driver's seat. Exor, a $24 billion holding structure, acts as the investment vehicle of Italy's Agnelli family and is led by John Elkann, the grandson of industrialist Gianni Agnelli, who became president of Fiat in the late 1960's and led the company's global expansion. Elkann joined Fiat's board when he was just 21 and was mentored throughout his career by Sergio Marchionne, the serial dealmaker who led Fiat from 2004 until he passed away in 2018.
Under Elkann, Exor controls stakes in American reinsurer PartnerRe, which the group acquired for $6.9 billion in 2015. It also controls more than 20% of both Ferrari and capital goods conglomerate CNH Industrial, and is the majority owner of the Italian football juggernaut Juventus Turin.
Marchionne and Elkann reportedly shared the belief that only a transformative deal would secure the legacy of Fiat—and in turn that of the Agnelli dynasty—and had their sights set on a tie-up with General Motors, which was rejected by CEO Mary Barra in 2015, per reports.
Globetrotting industrialist Elkann has often been portrayed as a pragmatist who is driven by numbers rather than emotions. Public statements, however, have revealed his sense of duty towards the family and his desire to future-proof the business interests for decades to come. Pulling off a deal as audacious as a merger between FCA and Renault would go a long way in achieving that goal. It would also illustrate that his formative years under Marchionne's wing are being put to good use.
Image courtesy of Fiat Chrysler Automobiles
Check out the 1Q 2019 M&A report.