PSA share price drops after GM exit disclosure

Article by Christian Andrei, on December 16, 2013

Shares of PSA/Peugeot Citroen dropped 12-percent to EUR9.34 on December 13, 2013, Friday, following the announcement by General Motors that it will sell its entire stake in the French carmaker. GM acquired the stake for EUR320 million in 2012 as part of a partnership between the US and French carmaker that was expected to improve their results.

However, the partnership has been struggling to achieve the initial goals, as PSA recently said that savings from the alliance will be 40 percent less than originally planned. The alliance has already been scaled back, and PSA is now seeking to deepen its ties with Chinese partner Dongfeng Motor Corp., which could help it increase sales in China and other growth regions.

GM is allied with SAIC Motor Corp. GM remarked that it will support PSA's alliance with another carmaker provided that their existing partnership continues. Erich Hauser, an analyst with International Strategy and Investment Group in London, remarked that GM's exit from PSA makes it easier for the French carmaker to pursue an agreement with Dongfeng, since the US carmaker and the Chinese company are direct rivals in China.

He, however, noted that the timing of the exit is "not ideal for Peugeot and raises questions about the future of their cooperation." PSA has plunged 22 percent last week, valuing the French carmaker at EUR3.31 billion ($4.54 billion). GM's stake was worth EUR264 million at the close of trading Thursday. GM plans to sell its 24.8 million shares through a private placement to institutional investors with Goldman Sachs Group Inc. managing the transaction.

Topics: gm, psa

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