PSA/Peugeot-Citroen is holding exclusive discussions to sell a 75-percent stake at its Gefco trucking unit to OAO Russian Railways for around EUR800 million ($1.04 billion). Under the conditions of a sale, Gefco would initially pay a special dividend of EUR100 million to PSA, PSA disclosed in a statement. The French carmaker said the agreement would allow Gefco to “further enhance” its geographic expansion strategy in China, India and Latin America and to boost its growth in eastern and central Europe, particularly in Russia. PSA and Gefco will ask their works council about the agreement, which has to be approved by antitrust authorities, PSA said. In February 2012, PSA disclosed plans to sell assets, including a stake in Gefco, as it tries to cope with the excessive capacity in the European auto industry as well as increasing debt.
According to Vladimir Yakunin, chief executive of Russian Railways, the company’s offer to acquire Gefco is part of its efforts to copy rivals like German railway operator Deutsche Bahn AG in setting up a logistics arm alongside train and infrastructure operations. Fitch Ratings recently downgraded PSA’s debt rating to three levels below investment grade, highlighting the carmaker’s need for more money.
Other major rating services slashed PSA’s long-term debt two levels below investment grade in July 2012 after its carmaking unit posted EUR662 million in losses in the first half of 2012. PSA divulged that it burned EUR200 million in cash per month for the last year. According to Xavier Caroen, an analyst at Kepler Capital Markets SA, PSA still burns around EUR100 million in cash per month, and the carmaker could still thrive for about eight months if the Gefco deal pushes through.