PSA confirms negotiations with Dongfeng over capital hike

Article by Anita Panait, on December 13, 2013

PSA/Peugeot-Citroen is considering new commercial and industrial projects with partners like Dongfeng Motor Group, as supported by a capital increase. In a statement, PSA said that the discussions are still at a preliminary stage and "no assurances can be given as to their conclusion." It said that there is no agreement on the terms of a potential operation.

A source privy with the matter told Reuters that PSA's board has approved a draft alliance plan this week wherein Dongfeng and the French state would acquire large minority stakes at a 40-percent discount to PSA's current share price. The board also agreed to enter final negotiations on a EUR3.5 billion ($4.8 billion) share issue that would lead to France and Dongfeng taking 20 percent stakes, the source said.

The capital hike would be priced at below EUR7 per share, and at a low of EUR6.85 in indicative offer from Dongfeng. Financial Times recently reported, citing anonymous sources, that PSA and Dongfeng are planning joint production of small cars for Southeast Asian markets, underpinned by a transfer of still specified technologies.

PSA is one of the carmakers heavily struggling in Europe, no thanks to the current slump in the region. PSA is cutting jobs and capacity to put an end to its losses. Outgoing CEO Philippe Varin has disclosed that the French carmaker is exploring a deeper relationship with Dongfeng.

Topics: psa, dongfeng

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