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| Chinese Firm and France to Buy Stakes in Peugeot | Chinese Firm and France to Buy Stakes in Peugeot |
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| HONG KONG — PSA Peugeot Citroën, the struggling French automaker, will receive big injections of capital from the Chinese automaker Dongfeng Motor and the French government, Dongfeng announced Wednesday in a filing in Hong Kong. | HONG KONG — PSA Peugeot Citroën, the struggling French automaker, will receive big injections of capital from the Chinese automaker Dongfeng Motor and the French government, Dongfeng announced Wednesday in a filing in Hong Kong. |
| The Peugeot family, which holds 25.4 percent of the company’s shares, agreed on Monday to reduce its stake to 14 percent, according to a person with direct knowledge of the matter. That paved the way for the Peugeot board on Tuesday to adopt a rescue plan, said the person, who asked not to be identified because the board meeting was private. | The Peugeot family, which holds 25.4 percent of the company’s shares, agreed on Monday to reduce its stake to 14 percent, according to a person with direct knowledge of the matter. That paved the way for the Peugeot board on Tuesday to adopt a rescue plan, said the person, who asked not to be identified because the board meeting was private. |
| The board voted unanimously in favor of the plan, the person said, under which Peugeot would issue about 3 billion euros, or $4.1 billion, in new shares. Dongfeng and the French state will each buy a portion of the shares, giving each 14 percent stakes. | The board voted unanimously in favor of the plan, the person said, under which Peugeot would issue about 3 billion euros, or $4.1 billion, in new shares. Dongfeng and the French state will each buy a portion of the shares, giving each 14 percent stakes. |
| In an announcement to the Hong Kong stock exchange on Wednesday morning, Dongfeng provided further details on the structure of the deal, which it said was worth €3 billion in total. | |
| The Chinese company and the French government will each inject €524 million to the carmaker via an increase in Peugeot’s share capital priced at €7.50 per share, a sharp 40 percent discount from Peugeot’s closing share price Tuesday. Dongfeng and France would each acquire shares worth €276 million through a separate rights issue, and each will control 2 seats on the carmaker’s board of directors. | The Chinese company and the French government will each inject €524 million to the carmaker via an increase in Peugeot’s share capital priced at €7.50 per share, a sharp 40 percent discount from Peugeot’s closing share price Tuesday. Dongfeng and France would each acquire shares worth €276 million through a separate rights issue, and each will control 2 seats on the carmaker’s board of directors. |
| In addition, Peugeot will raise around €800 million issue by issuing warrants to its existing shareholders entitling them to subscribe to new shares in the carmaker at a price of €7.50 per share. Peugoet shares closed Tuesday at €12.50. | In addition, Peugeot will raise around €800 million issue by issuing warrants to its existing shareholders entitling them to subscribe to new shares in the carmaker at a price of €7.50 per share. Peugoet shares closed Tuesday at €12.50. |
| Dongfeng said the preliminary agreement, which has yet to be completed and requires approval from shareholders and regulators, would also see the Chinese and French car companies deepen their existing manufacturing joint venture in China. That includes proposals to establish a new research and development center in China, and to set up a new export sales company targeting Southeast Asia, according to Dongfeng’s announcement. | Dongfeng said the preliminary agreement, which has yet to be completed and requires approval from shareholders and regulators, would also see the Chinese and French car companies deepen their existing manufacturing joint venture in China. That includes proposals to establish a new research and development center in China, and to set up a new export sales company targeting Southeast Asia, according to Dongfeng’s announcement. |
| Peugeot, Europe’s second largest automaker in terms of unit sales, after Volkswagen, has been burning cash for years. As it has lost market share in its core European markets to VW and its nimbler French rival, Renault, Peugeot has tried to cut production capacity to better match demand, last year closing its Aulnay-sous-Bois plant, near Paris. | Peugeot, Europe’s second largest automaker in terms of unit sales, after Volkswagen, has been burning cash for years. As it has lost market share in its core European markets to VW and its nimbler French rival, Renault, Peugeot has tried to cut production capacity to better match demand, last year closing its Aulnay-sous-Bois plant, near Paris. |
| In addition to seeking new cash, the company has hired Carlos Tavares, the former chief operating officer at Renault, to take over from Philippe Varin as chief executive, with a brief of turning around the automaker. | In addition to seeking new cash, the company has hired Carlos Tavares, the former chief operating officer at Renault, to take over from Philippe Varin as chief executive, with a brief of turning around the automaker. |
| Dongfeng is one of China’s largest automakers, and it and Peugeot have been assembling vehicles together in China since 1992. Their Fukang model taxi is well known in China. | Dongfeng is one of China’s largest automakers, and it and Peugeot have been assembling vehicles together in China since 1992. Their Fukang model taxi is well known in China. |
| The alliance with Peugeot is expected to give Dongfeng, which is based in Wuhan, China, access to Peugeot’s technology and to its European distribution network, catapulting a company that is little known outside of its home market onto the international stage. | The alliance with Peugeot is expected to give Dongfeng, which is based in Wuhan, China, access to Peugeot’s technology and to its European distribution network, catapulting a company that is little known outside of its home market onto the international stage. |
| Antonia Krpina, a spokeswoman for Peugeot, declined to comment on Tuesday, saying that the company would make an announcement on Wednesday when the automaker presented its annual financial results. | Antonia Krpina, a spokeswoman for Peugeot, declined to comment on Tuesday, saying that the company would make an announcement on Wednesday when the automaker presented its annual financial results. |
| Peugeot shares, up 32 percent already this year on expectations of a deal, fell 2.2 percent Tuesday in Paris trading, giving the company a market value of about €4.4 billion. | Peugeot shares, up 32 percent already this year on expectations of a deal, fell 2.2 percent Tuesday in Paris trading, giving the company a market value of about €4.4 billion. |
| Peugeot is already heavily dependent on French government support. Although the state does not currently own a stake in the automaker, in 2012 the Finance Ministry provided the company’s consumer finance business, Banque PSA, with €7 billion of credit guarantees. | Peugeot is already heavily dependent on French government support. Although the state does not currently own a stake in the automaker, in 2012 the Finance Ministry provided the company’s consumer finance business, Banque PSA, with €7 billion of credit guarantees. |
| Peugeot is also expected to announce on Wednesday that the finance unit, whose debt is rated at junk status, will tie up with Banco Santander, the big Spanish bank, in a deal intended to put Banque PSA on sounder footing. A spokeswoman for Santander declined to comment on Tuesday. | Peugeot is also expected to announce on Wednesday that the finance unit, whose debt is rated at junk status, will tie up with Banco Santander, the big Spanish bank, in a deal intended to put Banque PSA on sounder footing. A spokeswoman for Santander declined to comment on Tuesday. |
| While the capital injections from Dongfeng and the French government will give Peugeot a respite from its financial pressures and allow it to invest in research and development, many industry watchers have expressed skepticism about the automaker’s prospects for success, noting its long history of soured international partnerships. | While the capital injections from Dongfeng and the French government will give Peugeot a respite from its financial pressures and allow it to invest in research and development, many industry watchers have expressed skepticism about the automaker’s prospects for success, noting its long history of soured international partnerships. |
| Peugeot’s primary problems, they note, are its faltering European business and its relatively high cost structure. It is not clear how bringing in a state-owned Chinese company and the French government on equal ownership terms will resolve those problems. | Peugeot’s primary problems, they note, are its faltering European business and its relatively high cost structure. It is not clear how bringing in a state-owned Chinese company and the French government on equal ownership terms will resolve those problems. |
| The new ownership structure, they say, could actually hinder the company’s ability to adapt — particularly if the French government shows itself hostile to the kind of large-scale restructuring effort that many analysts say is necessary. Analysts at Bernstein Research said in a research note last week that they “don’t understand fully why Peugeot wants this deal with Dongfeng,” adding, “if you just need money there are probably better options.” | The new ownership structure, they say, could actually hinder the company’s ability to adapt — particularly if the French government shows itself hostile to the kind of large-scale restructuring effort that many analysts say is necessary. Analysts at Bernstein Research said in a research note last week that they “don’t understand fully why Peugeot wants this deal with Dongfeng,” adding, “if you just need money there are probably better options.” |