PARIS: PSA Peugeot Citroen agreed to a capital tie-up with China’s Dongfeng and the French state, a source said, ending the reign of one of France’s oldest industrial dynasties.
In the latest buy-in of a Chinese giant to a struggling Western firm, the source close to the deal said Peugeot’s board approved an agreement for Dongfeng and the French government to each inject ¤800m ($1.1bn) for 14 percent stakes in the company.
The total fundraising effort could bring in at least ¤3bn through the sales of additional shares. Full details of the deal are to be released today along with Peugeot’s 2013 results.
The Peugeot family — which has controlled the firm since its founding in 1810 as a maker of coffee mills and bicycles — will see its 25 percent stake and 38 percent voting rights diluted to the same amount as the stakes for the government and Chinese state-controlled Dongfeng.
The deal will come to Peugeot’s rescue after the group, Europe’s second-largest carmaker, suffered the indignity of needing ¤7bn in state-guaranteed refinancing to rescue its credit arm.
Peugeot has been among the hardest hit by a European slump in car sales, suffering a ¤5bn loss in 2012 and cutting thousands of jobs. For China, where Dongfeng is the second-biggest carmaker, the agreement marks the latest high-profile acquisition by the economic powerhouse of a Western company. Last month, Chinese tech giant Lenovo bought Motorola from Google in $2.9bn deal.
Under the Peugeot deal, the family will see its number of board seats reduced from four to two, with Thierry Peugeot expected to lose his post as chairman.
None of the three main shareholders would be allowed to increase its stake for 10 years — seen as an effort to limit Dongfeng’s influence at Peugeot, which employs nearly 90,000 people in France.
The final deal is expected to be signed at the end of next month during a visit by Chinese President Xi Jinping to Paris.
The source said the Peugeot board also agreed a tie-up between its financing arm and Spanish bank Santander to begin at the end of 2016 when state-guaranteed funding expires.
It as well approved the appointment of former Renault executive Carlos Tavares as the new CEO to replace Philippe Varin, the man often blamed for guiding the company into its current turmoil, the source said.
Last year, a government-ordered enquiry found that Peugeot had made strategic mistakes for years by not seizing fully the opportunities of globalisation.
The company is hoping the link with Dongfeng will give it a boost in China, which is now the group’s number two market behind France and where it operates three joint factories. AFP
