PSA Peugeot Citroen’s deal to sell stakes to France and Dongfeng Motor Corp. may end up trading a cash influx for a shareholder structure that threatens to hobble the manufacturer’s decision-making. The board of Europe’s second-largest carmaker is to meet to vote on the agreement. Under the outline of the plan, which Peugeot has said would raise €3 billion, the French government, Dongfeng and the Peugeot family would end up with roughly equal stakes.
Chairman Thierry Peugeot said in a letter last month to his cousin Robert that the plan will create a "three-headed governance" structure, making the Paris-based company difficult to run. Still, he was overruled and the family's holding companies, which currently control 38 per cent of Peugeot's voting rights, supported going ahead with the deal.
“We see a risk of a Pyrrhic victory,” Max Warburton, an analyst with Bernstein Research, said in an open letter to Thierry. “The Dongfeng deal will close out strategic options,” and the involvement of France and the state-backed Chinese company “is hardly likely to lead to improved efficiency, competitiveness and growth.”
Question marks over the deal have grown as Peugeot nears its self-imposed deadline for reaching an agreement. Earlier this month, the Paris-based company, which has burned through more than €4 billion over the last two years, said that its board expressed “full support” for the proposal. The goal is to expand overseas to reduce exposure to Europe, where industrywide car demand is near a two-decade low.
Thierry Peugeot has favored raising capital by selling new stock on the market without investments by Dongfeng or France, according to people familiar with the situation. Some are hoping he can still thwart the deal. “Before you give up, isn’t it worth one last try as an independent?,” Bernstein’s Warburton said in his appeal to Thierry Peugeot. “It’s not too late to turn back.”