PSA board okays draft agreement for EUR3 billion capital hike

Article by Anita Panait, on January 21, 2014

The board of PSA/Peugeot-Citroen has approved an outline deal intended to raise EUR3 billion ($4.1 billion) through stake sales to Dongfeng Motor and the French government, reports have said. Once completed, the agreement would mark a defining moment in the history of PSA, which has been controlled by the Peugeot family since 1896.

According to the reports, the stake sale would lead to Dongfeng, the French government and the Peugeot family each holding 14 percent stakes in PSA. According to Les Echos, PSA's supervisory board has agreed on a two-part recapitalization program: a rights issue to existing shareholders and a subsequent issue of additional shares on the market.

Reuters and Bloomberg, quoting a source privy with the matter, reported that PSA’s board has approved the draft agreement. According to Les Echos, Dongfeng and the French government would bring in EUR750 million to acquire 14 percent stakes at a price of EUR7.50-EUR8 per share. This would dilute the Peugeot family's holdings to 14 percent from the current 25 percent.

In the second stage, PSA would then conduct a EUR1.4 billion rights issue to make up for the remaining amount. The Peugeot family would likewise inject EUR100 million to maintain its stake at 14 percent. PSA chief executive Phillipe Varin is looking to finalize the agreement by Feb. 19, 2014, when the carmaker discloses its 2013 annual results.

French press reports say the Peugeot family was divided over the extent of its participation in the capital hike as well as on the size of the stake sale to Dongfeng. PSA Chairman Thierry Peugeot has opposed a capital increase involving Dongfeng, arguing that the hiring of Carlos Tavares as the next CEO and the improvement in European car market would help PSA raise EUR3 billion just via a public rights issue.

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