The board of directors of French carmaker PSA (peup. PA) and Fiat Chrysler (fcha. Mi) met on Tuesday to approve a $50 billion binding merger agreement, the source said.
The two medium-sized automakers announced plans six weeks ago to merge to build the world's fourth largest automaker and reshape the global auto industry. The merger is expected to help them cope with major challenges in the industry, including a decline in global demand and the development of high-cost clean cars to meet the environmental requirements to be implemented.
Neither company would comment.
A source close to Fiat Chrysler earlier said the two companies could formally announce the agreement early Wednesday, with a press conference later that day to explain further details.
Two sources pointed out that China Dongfeng Motor (0489. HK) currently holds 12.2% of the PSA group's equity, and will hold 4.5% of the combined company's equity in the future, which is expected to help easier regulatory approval.
FCA and PSA are expected to complete the deal by the end of 2020, creating a group with annual sales of 8.7 million vehicles, a source said.
This will make it the fourth largest automotive group in the world, after Volkswagen (vwg_p.de), Toyota (7203. T) and Renault Nissan Alliance. FCA just six months ago abandoned merger talks with Rena. PA, PSA's French rival.
But the deal could still face tough regulatory scrutiny, with Italian and French governments and local unions worried about potential job losses; the combined companies have about 400000 workers.
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