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AvtoVAZ Investor Sees Renault-Nissan Stake Gain in Stages

Peugeot to Sell Shares at 42% Discount in Capital Increase
A Peugeot 208 automobile produced by PSA Peugeot Citroen, sits on display during the first press day of the Geneva International Motor Show, in Geneva. Photographer: Chris Ratcliffe/Bloomberg

PSA Peugeot Citroen, Europe’s second-biggest carmaker, plans to sell shares in a 1 billion-euro ($1.32 billion) capital increase at a 42 percent discount.

Shareholders, who will have the right to buy 16 shares for every 31 they already own, will pay 8.27 euros per share, the Paris-based carmaker said in an e-mailed statement today. That compares with a closing price of 14.21 euros yesterday.

General Motors Co. and Peugeot announced last week a broad alliance that will include joint purchasing and vehicle development in an effort to revitalize their European operations. GM will buy 7 percent of the French carmaker as part of the partnership.

“This money will be directed to our strategic projects with GM,” Chief Financial Officer Jean-Baptiste de Chatillon said on a conference call with journalists today. “The money will allow us to accelerate this strategy.”

Peugeot declined 50 cents, or 3.5 percent, to 13.71 euros at the close of Paris trading. The shares have gained 13 percent this year, valuing the French carmaker at 3.21 billion euros.

“The share price never falls down to the offer price,” said Philippe Houchois, a UBS AG automotive analyst in London. “In theory, the price should be 12.30 euros, but a lot will happen in the next two weeks. Peugeot’s shares will eventually stabilize if everything remains constant.”

No Dividend

Peugeot said that 31 percent of the shares were already subscribed through commitments from the Peugeot family and GM. The Detroit-based carmaker said yesterday that it had agreed to pay about 320 million euros to acquire its stake. Peugeot will not pay a 2011 dividend and instead use the money for projects.

“We need our dividend to invest in projects despite the positive result,” the CFO said.

The GM-Peugeot agreement calls for at least four vehicles to be manufactured within four years, or planned for production within the following 18 months, GM said yesterday in a filing with the U.S. Securities and Exchange Commission.

Peugeot is projected to use just 62 percent of its European capacity this year, compared with 74 percent at Opel, according to LMC Automotive in Oxford, England. The two have not mentioned any plans to close plants or cut jobs as part of the alliance.

“Without reductions in production capacity, the two carmakers are unlikely to derive any benefits from the alliance before 2014, when the advantages of joint purchasing abilities become effective,” said Albrecht Denninghoff, a Frankfurt-based Silvia Quandt analyst.

Peugeot Family

The offer price is a 32 percent discount to the theoretical ex-right price of 12.33 euros, the carmaker said.

The Peugeot family will remain the largest shareholder following the increase, with 25.2 percent of the capital and 37.9 percent of the voting rights, Peugeot said. The family currently owns 30.3 percent of the capital.

The initial terms of the alliance are for 10 years with automatic renewal periods of three years, GM said. The U.S. automaker will become the second-largest shareholder.

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