PARIS — Fiat Chrysler withdrew a $35 billion merger offer for France’s Renault, abruptly calling off what would have been a landmark deal to create the world’s third-biggest automaker.
Renault directors failed to reach a verdict on FCA’s May 27 merger proposal at a board meeting that ran late Wednesday, the company said. The board was “unable to take a decision due to the request expressed by the representatives of the French state to postpone the vote to a later meeting,” Renault said in a statement.
Fiat Chrysler pulled the merger offer for Renault after the French automaker’s Japanese partner, Nissan Motor Co., declined to support the deal, The Wall Street Journal reported late Wednesday, citing people familiar with the matter.
Nissan’s two representatives on Renault’s board were withholding support as other board members prepared to vote in favor of the $35 billion merger, the paper said. The opposition from Nissan representatives raised doubts about the Japanese automaker’s commitment to preserving the alliance if the merger were to proceed, the paper said.
“FCA remains firmly convinced of the compelling, transformational rationale of a proposal that has been widely appreciated since it was submitted, the structure and terms of which were carefully balanced to deliver substantial benefits to all parties,” the company said in a statement. “However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully.”
The French government, a major Renault shareholder, said Wednesday it wouldn’t approve FCA’s merger proposal without Nissan’s guarantee that Renault’s alliance with Nissan would survive. The French government asked to delay a vote on the merger, prompting Fiat Chrysler to withdraw its merger proposal, The Wall Street Journal said, citing people close to the matter.
France was making progress toward a deal that would meet its demands, most of which were granted by Fiat, according to a French official who asked not to be named.
However, French officials wanted more time to secure other requests, including that Nissan come on board before a combination move forward. More time was needed to reassure the Japanese side and explain the deal, a source told Bloomberg, adding the French government was surprised that Fiat suddenly withdrew its offer.
On Monday, Nissan CEO Hiroto Saikawa said that the proposed merger, if realized, would significantly alter the structure of Renault.
“This would require a fundamental review of the existing relationship between Nissan and Renault,” Saikawa said.
FCA had earlier reached a tentative agreement with France on the terms of the proposed merger with Renault, two sources told Reuters.
The French state, which owns 15 percent of Renault, had been seeking more influence over the merged company, firmer job guarantees and improved terms for Renault shareholders in return for blessing the $35 billion tie-up.
Renault, FCA and the French government all declined to comment earlier on the ongoing board discussions.
Analysts had warned of complications with the deal, including Renault’s existing alliance with Nissan, the French state’s role as Renault’s largest shareholder and potential opposition from politicians and workers to any cutbacks.
FCA has been locked in talks with Renault and the French state over its bid to create the world’s third-biggest carmaker. France had broadly welcomed the deal, on condition it guarantees Renault’s domestic blue-collar jobs and plants.
The collapse of his merger-of-equals proposal marks a significant retreat for FCA Chairman John Elkann, who leads the company’s founding Agnelli family. After discussions with Renault’s cross-town rival Groupe PSA, Elkann opted for the riskier path, proceeding with an offer for Renault despite the complications of the government’s role and its strained relationship with alliance partner Nissan.
The breakdown of talks on a night when a deal appeared to be in hand also leaves Renault Chairman Jean-Dominique Senard in a difficult position — having sought and failed to bring the French carmaker’s various constituencies into agreement. In addition to the demands from the French state, unions were worried about jobs and Nissan felt burned by the previous regime under deposed alliance Chairman Carlos Ghosn.
Renault’s board was poised to approve the deal, with Nissan representatives abstaining, people familiar with the matter told Bloomberg. But France’s representatives asked for more time after officials made clear they wanted to discuss with Japanese authorities before making a decision, they said. Finance minister Bruno Le Maire plans a trip to Japan soon, one of the people told Bloomberg.
More time was needed to reassure the Japanese side and explain the deal, a French government official said, asking not to be identified to comply with ground rules. The person added that the government found surprising Fiat’s rushed move to withdraw its offer.
A spokesman for the minister didn’t return requests for comment.
Criticism of Fiat’s May 27 proposal has gathered steam in recent days. France asked for more assurances on jobs, board representation and the role of Senard, 66, who would be CEO of the combined company.
Some investors have also voiced doubts. Paris-based activist investment manager CIAM, in a letter to Renault’s board, said the merger with Fiat significantly undervalues Renault and that a 2.5 billion-euro ($2.8 billion) dividend set to go to Fiat Chrysler shareholders should instead be paid to the French company.
Bloomberg and Reuters contributed to this report.