MILAN/PARIS (Reuters) – Fiat Chrysler has made a “transformative” all-share merger proposal to French rival Renault, the Italian-American carmaker said on Monday, in a deal to create a new third-ranked global manufacturer.

The FCA proposal, finalised in overnight talks with Renault, was being discussed at a meeting of the French group’s board early on Monday.

The deal would create a carmaker selling 8.7 million vehicles a year with a strong presence across key regions, automotive markets and technologies, generating 5 billion euros ($5.6 billion) in annual savings, FCA said in a statement.

The “broad and complementary brand portfolio would provide full market coverage, from luxury to mainstream”, it said.

The proposed deal would merge the two carmakers under a listed Dutch holding company. After payment of a 2.5 billion- euro special dividend to FCA shareholders, each group would receive 50 percent of the combined entity in new stock.

Pressure for consolidation among carmakers has grown with the challenges posed by electrification, tightening emissions regulations and expensive new technologies being developed for connected and autonomous vehicles.

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