PSA/Peugeot-Citroen's board is set to meet on Sunday, January 19, 2014, to talk about a EUR1-billion ($1.4 billion) investment from Dongfeng Motor Corp. and the French state, insiders told Bloomberg. Dongfeng and the French government are believed to be willing to each invest at least EUR500 million in exchange for 10 percent of PSA stock.
PSA would later sell shares to bring the overall funds to EUR3 billion, the people said, adding that decision on the size of the rights issue is still under consideration. The Sunday meeting may not lead a definitive agreement, they also said. The controlling Peugeot family is still divided over whether to accept the agreement, the people said. The agreement would see the 25.5 percent holdings of the Peugeot family diluted to around 15 percent following a capital increase, one of the people told Bloomberg.
An agreement with Chinese carmaker Dongfeng would mark a defining moment in PSA’s history, whose fate has been tied with the Peugeot family since its founding in 1896 by Armand Peugeot. It would also mark a shift in strategic emphasis after an alliance with General Motors failed to result to expected cost reductions.
PSA acknowledged in December plans for a possible capital hike to boost its financing as it suffers from financial losses. The French carmaker said last month that slumping auto markets and unfavorable exchange rates in Russia and Latin America will cause it to take a EUR1.1-billion non-cash charge for 2013. PSA posted a first-half operating loss of EUR510 million in its automotive unit.