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 The agreement is due to be presented to the Peugeot board on
February 18 and likely signed as a non-binding memorandum of
understanding the same day, according to three sources with direct
knowledge of the situation.
Peugeot, battered by Europe's prolonged auto demand slump and
sustained by 7 billion euros of state guarantees, needs a cash
infusion to stay afloat. The planned share sale to Dongfeng and the
French government may be its last survival hope after the failure of
earlier deal talks with U.S.-based General Motors <GM.N>.
The accompanying industrial plan would see Peugeot and Dongfeng
retain and expand their existing joint venture, increasing research
and development cooperation with a view to expanding into South East
Asian markets, according to the sources, who declined to be named
because the talks were confidential.
Peugeot has been in talks with Dongfeng for months over a rescue
plan that would see the Chinese automaker and French government take
matching stakes of about 14 percent each.
CHOOSING A CHAIRMAN
With most details now agreed — including a heavily discounted 7.50
euro issue price for the two new shareholders — the choice of a new
independent chairman is the main outstanding point to be resolved,
several sources said. Peugeot shares closed at 12.52 euros on
Wednesday.
The French government is pushing Louis Gallois, a senior civil
servant who joined the Peugeot board on a nominally independent
ticket as a condition of the existing state guarantee in place since
2012, the sources said.
But Dongfeng is resisting his nomination and rooting instead for
prominent French businesswoman Patricia Barbizet, another
independent Peugeot director.
A spokeswoman for Barbizet did not immediately return calls seeking
comment. Peugeot declined to comment on the deal talks with
Dongfeng.
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Zhou Mi, a spokesman for the Wuhan, China-based Dongfeng, said he
was not aware of any agreement so far. He said the company would
make a public announcement if any deal was reached.
Shares of Hong Kong-listed Dongfeng were down 1.6 percent in
Thursday trading. The overall market <.HSI> was 0.4 percent lower.
Under the terms, to be announced with its full-year results next
week, Peugeot will raise 3 billion euros through the reserved share
sale to Dongfeng and the French government and through a smaller,
subsequent rights issue to existing shareholders.
Current shareholders will also receive warrants to purchase
additional stock at an equivalent price in an operation that may
raise as much as 1 billion euros more, one source said.
French deal negotiators returned this week from China after a final
round of substantive talks with state-owned Dongfeng, he said.
The French carmaker said on January 20 it was engaged in discussions
on a deeper Dongfeng partnership backed by a 3 billion euro capital
increase and warrants issue. ($1 = 0.7312 euros)
(Additional reporting by Samuel Shen in
Shanghai; editing by Keiron Henderson, Andrew Callus and Miral
Fahmy)
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