PARIS -- Fiat Chrysler Automobiles is discussing a Renault special dividend and stronger job guarantees in a bid to persuade the French government to back its proposed merger of the automakers, sources close to the discussions said.
The improved offer would also see the combined company's operations headquartered in France and the French state granted a seat on its board, two people with knowledge of the matter told Reuters on Sunday.
FCA is engaged in intensive discussions with Renault and the French government over the $35 billion merger proposal it pitched last Monday to create the world's third-biggest automaker.
The concessions being discussed are not definitive and depend on other aspects of an emerging compromise deal, both sources cautioned. They nonetheless increase the chances that the merger plan will be approved by Renault's board, on which the French state has two seats. The board meets again on Tuesday.
Fiat Chrysler Chairman John Elkann was in Paris over the weekend to discuss the deal, Bloomberg reported. He met with French Finance Minister Bruno Le Maire, who said last week he wants guarantees on preserving jobs, a ministry spokesman said.
A spokesman for the French finance ministry said Le Maire spoke to Elkann on Friday before the two met again on Saturday, and the minister saw Renault Chairman Jean-Dominique on Sunday night. There’s a consensus on the 50-50 ownership structure, the spokesman said. The ministry is still working on the details, he said.
Senard has been tapped to be chief executive officer of the combined company. Le Maire’s office wants Senard to stay in the role for at least four years, a source told Bloomberg.
Some analysts and French industry leaders had voiced doubts about the 5 billion euros ($5.6 billion) in claimed cost and investment savings, and whether the proposal represents a fair deal for Renault shareholders.
A Renault dividend would improve the valuation in their favor, balancing a 2.5 billion euro proposed dividend to FCA shareholders. The sources did not elaborate on the potential size of a Renault payout.
The merger plan would see the two automakers acquired by a listed Dutch holding company whose ownership would be split equally between current FCA and Renault shareholders, after special dividend payments.
FCA had proposed locating the combined group's operational head office in a neutral city, most likely London, but has now indicated readiness to base it in the greater Paris area, meeting a key French government demand, both sources said.
The French government is also likely to be granted a seat on the board to reflect its 7.5 percent stake in the merged company, the people said.
Nissan, whose matching 15 percent stake in its French alliance partner will also be diluted to 7.5 percent of the new group, receives a board seat under the plan unveiled on May 27.
Guarantees to maintain Renault's French blue-collar jobs and industrial sites would also be extended to four years from the two initially proposed under the compromise being discussed, the sources added.
Both France's pro-business government and Italy's populist administration back the merger in principle but fraught relations between the two could yet derail the deal if one side feels disadvantaged.
Under FCA's merger plan Renault shareholders including the French government would get an implied premium of about 10 percent, while FCA owners would get dividends to account for its higher equity value. Together, the companies had a market capitalization of about 33.6 billion euros ($37.5 billion) as of Friday.
Nissan, Renault’s 20-year alliance partner, isn’t part of the proposal. Its capital is valued at about $28.6 billion.
Criticism has emerged in France since the deal was announced, with newspaper Le Monde editorializing over conflicts in the role of banker Societe Generale as an FCA shareholder and Renault adviser.
Patrick Pelata, a former COO at Renault, said he doubted whether the 5 billion euros in annual synergies announced by Fiat and Renault could be achieved, and warned the deal could hurt Renault’s alliance with Nissan.
Bloomberg contributed to this report