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Report: PSA approves Dongfeng and French cash injection

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Report: PSA approves Dongfeng and French cash injection

A source close to the matter said PSA Peugeot Citroen’s board has approved yesterday the outline deal to raise cash by selling stakes to China’s Dongfeng and the French government.

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.

Peugeot is one of the carmakers worst hit by a six-year market slump in Europe that is only now beginning to abate, promising a gradual recovery from a two-decade low, with further losses for the industry in the near term.

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 ($2 billion) in cash last year in addition to restructuring costs.

Dongfeng, Peugeot’s partner in an existing Chinese joint venture, is in talks to purchase a significant stake in a 3 billion euro ($4.1 billion) capital increase, with the French state taking a matching holding, sources with knowledge of the matter have 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.

But the board agreement now clears the way for Peugeot to finalize a deal in which Dongfeng and the French government would each acquire 14 percent stakes at a price between 7.50 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 would each inject around 750 million euros, diluting the Peugeot family’s holding to a matching 14 from the current 25 %.

Via Reuters

by Aurel Niculescu (my Google+) - Monday, January 20th, 2014 - filed under Citroen, Industry, News, Peugeot. Image credit: .
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