(Adds dropped word in headline)
MILAN, Oct 31 (Reuters) - Fiat Chrysler and Peugeot's owner PSA said on Thursday they would join forces through a 50-50 share swap to create the world's fourth-largest automaker.
The boards of the two groups have mandated their respective teams to finalise discussions and reach a binding memorandum of understanding in the coming weeks, the two automakers said in a joint statement.
Fiat Chrysler (FCA) will pay its shareholders a 5.5 billion euro ($6.1 billion) special dividend and hand them its shares in its robot-making unit Comau, they said.
Chairman John Elkann will chair the combined group, which will be based in the Netherlands, they said, while Peugeot's Chief Executive Carlos Tavares will be the new CEO.
$1 = 0.8962 euros Reporting by Valentina Za and Giulio Piovaccari, editing by Stephen Jewkes