RNO Renault SA

By Olivia Bugault

Renault SA (RNO.FR) and Fiat Chrysler Automobiles NV (FCA.MI) shares surged Monday morning after FCA unveiled its merger proposal with France's Renault, a move that would create the world's third-largest car maker by production.

At 0723GMT, shares in FCA are up 12% at EUR12.85 and Renault trades 12.8% up at EUR56.31.

Fiat said that the combined business would be 50% owned by FCA shareholders and 50% by the shareholders of Groupe Renault and added that the majority of the board would be independent.

Fiat Chrysler fits well with Renault but a merger would also face headwinds, said Jefferies. "We see many challenges, from deal terms to restructuring and politics, but also very high complementarity, from geographic positions to EU scale, segments and LCVs," the brokerage said.

Citi analysts said that they prefer strong alliances rather than complicated mergers, however, they expected both stocks to positively react to this potential tie-up.

If the merger happens, it would create a car company with a combined value of $37 billion and annual vehicle production of almost nine million passenger cars.

Write to Olivia Bugault at olivia.bugault@dowjones.com

(END) Dow Jones Newswires

May 27, 2019 03:46 ET (07:46 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.