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Report: Fiat Chrysler may revamp Renault bid to gain French government support

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Report: Fiat Chrysler may revamp Renault bid to gain French government support

Fiat Chrysler Automobiles NV is in talks to improve terms of its proposed merger with Renault SA to win the support of the French government, Reuters reported June 2, citing people close to the discussions.

Sources reportedly said the Italian-American carmaker is planning to provide better job guarantees under the revised offer, as well as launch a Renault special dividend, but did not disclose the potential size of a Renault payout.

As part of the compromise being discussed, Renault's blue-collar employees and industrial sites in France would be retained for four years from the initial proposal of two years, the report said.

According to the news agency, a Renault dividend will also boost the French automaker's valuation as it balances a €2.5 billion proposed dividend to Fiat Chrysler's shareholders. Reuters said some analysts and French industry leaders have expressed concerns regarding Fiat Chrysler's offer and if it represents a fair deal for Renault's shareholders.

If finalized and accepted, the revised bid will see the combined entity's operations be based in France, meeting the French government's demand, sources told Reuters. This despite Fiat Chrysler's previous proposal of locating the merged company in a neutral city, like London, where it is headquartered, the report said.

The French government, which has two seats in Renault's board and owns 15% of the company, would also be granted a board seat in the combination that would create the world's third-largest automotive manufacturer.

The newswire said the improved bid will also increase the likelihood of the merger being approved by Renault's board despite the concessions being tentative. Renault's board will meet again June 4.

Fiat Chrysler on May 27 proposed a 50/50 merger with Renault to create a combined business with annual revenues of almost €170 billion, net profit of more than €8 billion and about 8.7 million annual vehicle sales. The deal, which will see Fiat Chrysler and Renault be absorbed by a listed Dutch parent company, confirmed earlier reports that Fiat Chrysler is planning to join Renault's industry alliance with Mitsubishi Motors Corp. and Nissan Motor Co. Ltd.

Nissan, which holds a 15% stake in Renault and will also receive a board seat under the merger plan, earlier expressed its opposition against more formal ties with Renault. On May 30, Nissan President and CEO Hiroto Saikawa told the Nikkei Asian Review in an interview that a fourth player could weaken Nissan's influence in the alliance. Nissan and Renault's relationship became fragile following the 2018 arrest of former Renault Chairman Carlos Ghosn, who had been advocating the merger of the two companies.

If a merger happens, the ownership of Nissan and the French government in the combined Fiat Chrysler-Renault will be diluted to 7.5%, the report added. The French government declined to comment, Reuters said.

Fiat Chrysler and Renault declined to comment on the matter, with Renault saying that the company's board will meet tomorrow and that further communication will be issued in due course.

Nissan and Mitsubishi did not immediately respond to requests for comment from S&P Global Market Intelligence.