PSA Peugeot Citroen’s supervisory board has agreed to sell stakes to Dongfeng Motor Corp and the French state as part of a move to raise €3 billion to fund a turnaround.
Dongfeng, the automaker’s Chinese partner, and the French government will each pay €800 million in return for holdings of 14 per cent apiece. The Peugeot family’s stake will be diluted to 14 per cent from the current 25.5 percent under the plan.
Peugeot will raise the rest of the €3 billion in a broader share sale and will issue €800 million in warrants to be traded in for stock at a future date.
“For Peugeot, it’s probably the right thing to do,” said Erich Hauser, a London-based analyst at International Strategy and Investment Group. “This transaction gives them the opportunity to develop something that’s hopefully better than the old Peugeot, something that’s less dependent on Europe.”
The deal marks a turning point for the 118-year-old manufacturer, with the family set to lose full control for the first time since the company was founded by Armand Peugeot. It also represents the carmaker's second attempt in two years to bring in a strategic investor to help restructure operations.
Europe’s second-largest automaker has said it will announce the outcome of the board’s meeting tomorrow when it reports 2013 earnings. Pierre-Olivier Salmon, a spokesman for Paris-based Peugeot, declined to comment on the board’s decisions.
The manufacturer's shares fell 2.2 per cent in Paris trading. The stock has surged 97 per cent over the past 12 months, valuing the company at 4.44 billion. The French company sold a 7 per cent stake to General Motors Co. in early 2012. The Detroit-based company disposed of the holding 21 months later after savings failed to live up to expectations. That transaction and a related rights offer reduced the family's previous holding of 30.3 per cent.
The board voted as well to appoint Carlos Tavares as Peugeot's new operations chief starting tomorrow. The former Renault SA manager was hired last year to replace chief executive officer Philippe Varin later in 2014.
Peugeot's board also agreed today to create a banking joint venture with Madrid-based Banco Santander SA.
Peugeot's deliveries in Europe fell faster than at competitors as the region's sovereign-debt crisis led to a six- year drop in industrywide demand through 2013. Its mid-market models such as the Peugeot 208 subcompact got squeezed by budget brands and compact cars from Audi and BMW. The company's market share in Europe shrank to 10.9 percent last year from 12.8 percent in 2007.
Bloomberg