PSA board approves sale of stake to Dongfeng, French government
PSA Peugeot Citroen's board has approved an outline deal to raise cash by selling stakes to China's Dongfeng and the French government, a source close to the matter said on Monday.
According to the person, who declined to be identified because the talks were confidential, the supervisory board approved the draft deal terms at a meeting late on Sunday.
"The possibility of a stake sale to the French state and Dongfeng has been agreed," the source said.
Peugeot is one of the carmakers worst hit by a six-year market slump in Europe that is beginning to abate, promising a gradual recovery from a two-decade low, with more losses for the industry in the near term.
Peugeot, which on Monday posted a 5 percent sales decline to 2.8 million vehicles in 2013, declined to comment on the board meeting or planned capital increase.
Cash infusion
The company has said it needs a cash infusion to stay competitive in the medium term. Peugeot is expected to confirm next month that it burned through about 1.5 billion euros (12.3 billion yuan) in cash last year in addition to restructuring costs.
Dongfeng Motor Co.. PSA's partner in a Chinese joint venture, is in talks to buy a significant stake in a 3 billion euro capital increase, with the French state taking a matching holding, sources said.
But Chairman Thierry Peugeot had resisted a capital increase plan backed by his cousin Robert Peugeot, who heads the family holding company, and outgoing CEO Philippe Varin, another source familiar with the talks said.
According to French press reports, the founding Peugeot family was divided over the extent of its participation in the capital increase and the size of the stake sale to Dongfeng.
New China capacity
But the board agreement now clears the way for Peugeot to finalize a deal in which Dongfeng and the French government each would acquire a 14 percent stake at a price between 7.5 and 8 euros per share, according to French newspaper Les Echos.
The two-stage operation would be evenly split between a rights issue to existing shareholders and a subsequent issue of additional shares on the market, the report said. Dongfeng and the French state each would inject 750 million euros, diluting the Peugeot family's holding to a matching 14 percent from the current 25 percent.
Peugeot's 2013 vehicle sales were weighed down by a 7 percent decline in Europe, where the Paris-based company does more than half of its business by volume.
But PSA is investing in new production capacity in China, where it sold 550,000 units last year. (See related story in this newsletter.)
Varin, who is stepping down this year, will be replaced by former Renault second-in-command Carlos Tavares, who joined Peugeot as CEO-in-waiting on Jan. 1.
"The possibility of a stake sale to the French state and Dongfeng has been agreed," the source said.
Peugeot is one of the carmakers worst hit by a six-year market slump in Europe that is beginning to abate, promising a gradual recovery from a two-decade low, with more losses for the industry in the near term.
Peugeot, which on Monday posted a 5 percent sales decline to 2.8 million vehicles in 2013, declined to comment on the board meeting or planned capital increase.
Cash infusion
The company has said it needs a cash infusion to stay competitive in the medium term. Peugeot is expected to confirm next month that it burned through about 1.5 billion euros (12.3 billion yuan) in cash last year in addition to restructuring costs.
Dongfeng Motor Co.. PSA's partner in a Chinese joint venture, is in talks to buy a significant stake in a 3 billion euro capital increase, with the French state taking a matching holding, sources said.
But Chairman Thierry Peugeot had resisted a capital increase plan backed by his cousin Robert Peugeot, who heads the family holding company, and outgoing CEO Philippe Varin, another source familiar with the talks said.
According to French press reports, the founding Peugeot family was divided over the extent of its participation in the capital increase and the size of the stake sale to Dongfeng.
New China capacity
But the board agreement now clears the way for Peugeot to finalize a deal in which Dongfeng and the French government each would acquire a 14 percent stake at a price between 7.5 and 8 euros per share, according to French newspaper Les Echos.
The two-stage operation would be evenly split between a rights issue to existing shareholders and a subsequent issue of additional shares on the market, the report said. Dongfeng and the French state each would inject 750 million euros, diluting the Peugeot family's holding to a matching 14 percent from the current 25 percent.
Peugeot's 2013 vehicle sales were weighed down by a 7 percent decline in Europe, where the Paris-based company does more than half of its business by volume.
But PSA is investing in new production capacity in China, where it sold 550,000 units last year. (See related story in this newsletter.)
Varin, who is stepping down this year, will be replaced by former Renault second-in-command Carlos Tavares, who joined Peugeot as CEO-in-waiting on Jan. 1.
