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By Catholic Online (NEWS CONSORTIUM)

10/14/2013 (11 months ago)

Catholic Online (www.catholic.org)

Agreement would mean that French family would lose control of car business

Dongfeng, one of China's leading car makers is reportedly looking into acquiring 20 to 30 percent of France's Peugeot. Under the plan, the struggling French auto giant would obtain a three billion euro capital increase. There is a catch: if the plan goes through, the Peugeot family would lose control of the company because the cash injection would dilute its 25.4 percent stake and 38.1 percent in voting rights.

Well known for its stylish vehicles, Peugeot nonetheless was among the hardest hit by the European auto slump.

Well known for its stylish vehicles, Peugeot nonetheless was among the hardest hit by the European auto slump.

Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

10/14/2013 (11 months ago)

Published in Business & Economics

Keywords: Peugeot, Dongfeng. car deal, European auto industry


LOS ANGELES, CA (Catholic Online) - The Peugeot family indicated it was ready to give up control as the company carried out initial soundings on a Dongfeng tie-up.

PSA Peugeot Citroen is preparing a $4.1 billion capital increase. Chinese partner Dongfeng along with the French government would take matching stakes in the auto maker.

People with inside knowledge of the plan shared information on the condition of remaining anonymous. A French delegation of executives, government officials and bankers is going to China for talks. An outline will be finalized, and the agreement could be as soon as a few weeks. 

If finalized, state-owned Dongfeng Motor Co Ltd and the French government would each contribute 1.5 billion euros and acquire 20 to 30 percent of the car maker, under the draft agreement, which Peugeot hopes to finish this year.

An expansion of DPCA, the Peugeot-Dongfeng joint venture in China would shortly follow, adding more Peugeot vehicles and technology to target other markets in the region.

Among the hardest-hit of a six-year European car sales slump, Peugeot is seeking more cooperation with Dongfeng or another automaker. Peugeot is seeking to cut costs and losses that have threatened its survival.

"Peugeot confirms it is studying new industrial and commercial projects with different partners, as well as the financing to accompany them," a company spokesman said, declining to elaborate. "None of these plans have yet reached an advanced stage."

The French finance ministry has declined to comment and Dongfeng officials were not immediately available out of office hours.

The new capital would be partially raised through a rights issue in which the Peugeot family would sell new stock to the French government with the remainder would be raised in a reserved capital increase.

The 3 billion euro cash injection would amount to 68 percent of the French car maker's 4.39 billion euro market value. It would be worth about 40 percent of the new share capital and also dilute the seven percent stake held by General Motors Co.

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