PSA Peugeot Citroen (UG)’s possible 3 billion-euro ($4.1 billion) stock sale is being challenged by a French shareholders’ group, which said the potential investors planning the move may be required to make a full takeover bid.
The French state, Chinese carmaker Dongfeng Motor Corp. (489) and the Peugeot family, which controls the Paris-based auto producer, may be considered as acting together in the proposal, potentially triggering an offer to buy out minority stockholders, the association, known as ADAM, said in a letter sent yesterday to Supervisory Board Chairman Thierry Peugeot.
France’s government and Wuhan-based Dongfeng are holding talks with the Peugeot founding family on terms for taking part in the stock sale to shore up finances, the French carmaker said on Jan. 20. Dongfeng and France would each contribute at least 750 million euros in return for holdings of about 14 percent apiece, with the family owning a matching stake, a person familiar with the matter said last month.
“What’s the point of writing a 3 billion-euro check if one doesn’t know what to do with it?” ADAM President Colette Neuville said in a telephone interview. While a stock sale may be necessary and Dongfeng may play a useful investing role, “if there’s no sound business project beyond that capital increase, then minority shareholders should be even more worried.”
Stockholders should be treated “in a fair manner” that protects them from, or compensates them for, possible dilution of their stakes by the larger investors, Neuville said. ADAM, which owns six Peugeot shares, hasn’t been mandated to represent other shareholders in the carmaker yet, she said.
Jean-Baptiste Thomas, a Peugeot spokesman, Zhou Mi, a Dongfeng spokesman, and Marianne Zalc-Muller, a spokeswoman for French Industry Minister Arnaud Montebourg, all declined to comment. French newspaper Les Echos reported on the shareholder letter earlier today.
Peugeot dropped as much as 27 cents, or 2.4 percent, to 10.90 euros and was down 1.7 percent as 1:49 p.m. in Paris trading. The shares have gained 94 percent in the last 12 months, valuing the manufacturer at 3.9 billion euros.
An investor whose stake exceeds 30 percent must make an offer for all other shares under French market rules. The possible combined holdings of France, Dongfeng and the Peugeot family would total 42 percent.
Peugeot pledged to reduce its cash consumption by at least 50 percent to 1.5 billion euros in 2013. The company already makes vehicles in partnership with Dongfeng as part of an effort to expand sales outside Europe, where Peugeot is the second-biggest carmaker by deliveries. The planned stock sale would need the formal approval of at least 66 percent of voting investors at a shareholders meeting.
The strategy follows a failed attempt to build a far-reaching alliance with Detroit-based General Motors Co. (GM) The Peugeot family, which currently holds about 25.5 percent of the shares and 38.1 percent of the voting rights, decided last week to back the capital increase, according to people familiar with the matter.
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