Fiat Chrysler rescinded its merger offer to Renault after the French government's demands became too much.

The deal is off.

Fiat Chrysler’s board of directors held a meeting this evening to put the final touches on a deal with Renault, including a press release announcing the two sides had reached an agreement for a merger that would create the third-largest automaker in the world.

However, in a span of about three hours, the deal unraveled under demands from the French government, sources close to the deal told 

The press release issued by FCA instead thanked “Groupe Renault, in particular to its Chairman and its Chief Executive Officer, and also to the Alliance partners at Nissan Motor Company and Mitsubishi Motors Corporation, for their constructive engagement on all aspects of FCA’s proposal.”

By the end of the meeting, which was led by Chairman John Elkann, FCA’s board resolved to “withdraw with immediate effect its merger proposal made to Groupe Renault.”

The deal appeared to be well on its way to being completed, despite early suggestions by the French government that there be no job losses at any plants in France and no plant closures. Reports suggested that FCA was prepared to meet those conditions.

However, yesterday the Renault board elected to hold off on proceeded with negotiations and due diligence on the merger, saying it wanted more time to discuss the proposal. Despite that, all indications were that the deal would proceed. But it appeared the French government was pushing for more.

“… (T)he structure and terms of which were carefully balanced to deliver substantial benefits to all parties. However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” FCA said in its release.

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