In a blow to Chairman Thierry Peugeot, who had championed an
alternative plan, the board agreed in principle to a capital
increase that would see the Chinese state-owned carmaker and French
government acquire minority stakes and the family cede control,
sources familiar with the matter said on Monday.
Peugeot confirmed in a statement that it was looking to raise 3
billion euros ($4.1 billion) in a deal with Dongfeng, after
unveiling a further 4.9 percent decline in global vehicle deliveries
for 2013 earlier on Monday.
The French government would subscribe to the share issue "on the
same terms and conditions as Dongfeng", Peugeot said, an assertation
later confirmed in a joint statement from French Finance Minister
Pierre Moscovici and Industry Minister Arnaud Montebourg.
The company's shares fell 11 percent on news of the board decision
to press ahead with the planned deal, which would dilute existing
"We're skeptical about this kind of plan — a very dilutive capital
increase for a weak industrial project," said Florent Couvreur, a
Paris-based analyst with CM-CIC Securities.
The operation would leave "three main shareholders with conflicting
objectives", Couvreur added in a note to investors. "This is a
rejection for Chairman Thierry Peugeot."
Peugeot has said it will need fresh funding to stay competitive and
is pursuing talks on a deeper relationship with Dongfeng, its
existing partner in a Chinese joint venture.
The two carmakers have been in discussions for months to extend
cooperation to other Asian countries, backed by a multi-billion-euro
share issue in which Dongfeng and the French government would
acquire significant stakes.
Peugeot, one of the worst casualties of a six-year European market
slump to a two-decade low, is expected to confirm next month that it
burned through about 1.5 billion euros in cash last year in addition
to restructuring costs.
Peugeot said its plan would raise capital in two stages, starting
with a reserved capital increase in which Dongfeng and the French
government would acquire matching stakes.
Both would then acquire more shares in a broader issue to the
With market conditions showing signs of improvement, Thierry Peugeot
had pushed an alternative deal replacing the French government's
role with a bigger market issue, potentially allowing the family to
remain the biggest shareholder, a source with knowledge of the
The Peugeot clan currently controls the carmaker through a 25
percent stake commanding 38 percent of voting rights.
But French ministers rejected that initiative, and the board gave
its agreement in principle late on Sunday to a deal in which the
family, French government and Dongfeng would end up with equal
holdings, the person said.
[to top of second column]
The government "will do everything and use its influence to ensure
PSA remains a major French carmaker," Finance Minister Pierre
Moscovici said before the meeting.
The chairman's push for an alternative had also divided the family
and management, two sources said, because it departed from the
framework backed by cousin Robert Peugeot, who heads the FFP <FFPP.PA>
family holding, and outgoing CEO Philippe Varin.
Thierry Peugeot's eventual replacement by a new independent chairman
is now a given, according to one, with the French state favoring
Louis Gallois, a senior civil servant and industrialist who already
sits on the Peugeot board.
The green light clears the way for negotiations in earnest on the
deal price, with Dongfeng so far willing to offer about 7 euros and
Peugeot holding out for 8 euros per share, one of the people said.
The size of the matching stakes — likely between 10 percent and 15
percent — will depend on the deal pricing and market conditions,
which may also affect the relative size of the reserved share sale
and market offering, the sources added.
Dongfeng and the French state would each contribute between 500
million and 800 million euros, according to one, with the Peugeot
family also paying 100 million euros for new shares.
Peugeot said it hoped to announce a deal along with the publication
of full-year results on February 19, adding that it was also
studying "alternative capital increase scenarios".
"The company cannot give any assurance regarding the outcome of the
project," Peugeot added.
The carmaker said its 2013 vehicle sales were weighed down by a 7.3
percent decline in Europe, where the Paris-based company does more
than half of its business by volume.
The overall decline overcame gains in Latin America and China, where
sales rose 26 percent to 557,000 vehicles.
Sales also tumbled 22 percent in Russia, and the company lost a
further 144,000 deliveries of semi-assembled vehicles as a result of
U.S.-led sanctions that have crippled Iranian production by Western
Varin will be replaced later this year by former Renault
second-in-command Carlos Tavares, who joined Peugeot as
CEO-in-waiting on January 1.
($1 = 0.7373 euros)
(Additional reporting by Gilles
Guillaume; editing by Mark John, Mark Potter and David Evans)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.