PSA Peugeot Citroen (UG)’s supervisory board agreed to sell stakes to Dongfeng Motor Corp. (489) and the French state as part of a move to raise 3 billion euros ($4.11 billion) to fund a turnaround, two people familiar with the matter said.
Dongfeng, the automaker’s Chinese partner, and the French government will each pay 800 million euros in return for holdings of 14 percent apiece, said one of the people, who asked not to be identified because the discussions are private. The Peugeot family’s stake will be diluted to 14 percent from the current 25.5 percent under the plan, the person said.
Peugeot will raise the rest of the 3 billion euros in a broader share sale and will issue 800 million euros in warrants to be traded in for stock at a future date, the person said.
“For Peugeot, it’s probably the right thing to do,” said Erich Hauser, a London-based analyst at International Strategy & Investment Group. “This transaction gives them the opportunity to develop something that’s hopefully better than the old Peugeot, something that’s less dependent on Europe.”
The deal marks a turning point for the 118-year-old manufacturer, with the family set to lose full control for the first time since the company was founded by Armand Peugeot. It also represents the carmaker’s second attempt in two years to bring in a strategic investor to help restructure operations.
Europe’s second-largest automaker has said it will announce the outcome of yesterday’s board’s meeting when it reports 2013 earnings today. Pierre-Olivier Salmon, a spokesman for Paris-based Peugeot, declined to comment on the board’s decisions.
The shares fell 2.2 percent to 12.50 euros in Paris trading yesterday. The stock has surged 97 percent over the past 12 months, valuing the company at 4.44 billion euros.
The French company sold a 7 percent stake to General Motors Co. (GM) in early 2012. The Detroit-based automaker disposed of the holding 21 months later after savings failed to live up to expectations. That transaction and a related rights offer reduced the family’s previous holding of 30.3 percent.
The board voted as well to appoint Carlos Tavares as Peugeot’s new operations chief starting tomorrow, the person said. The former Renault SA (RNO) manager was hired last year to replace Chief Executive Officer Philippe Varin later in 2014. Peugeot’s board also agreed today to create a banking joint venture with Madrid-based Banco Santander SA (SAN), said the people.
Peugeot’s deliveries in Europe fell faster than at competitors as the region’s sovereign-debt crisis led to a six-year drop in industrywide demand through 2013. Its mid-market models such as the Peugeot 208 subcompact got squeezed by budget brands and compact cars from Audi and BMW.
The company’s market share in Europe shrank to 10.9 percent last year from 12.8 percent in 2007. Peugeot has either posted declining earnings or was unprofitable in five of the last seven years.
To contact the reporter on this story: Mathieu Rosemain in Paris at firstname.lastname@example.org