Peugeot Keeps Capital-Increase Plan Amid Family Squabble

PSA Peugeot Citroen is sticking to a 3 billion-euro ($4.1 billion) stock-sale plan it’s negotiating with France and Dongfeng Motor Corp. amid criticism by some investors, including members of the controlling family.

The supervisory board “expresses its full support for the project presented by the management and has authorized it to pursue the talks with the aim to get approval from the board during its meeting on Feb. 18,” Paris-based Peugeot said in an e-mailed statement late yesterday. “The company can’t guarantee that the project will be successfully completed.”

Peugeot, Europe’s second-biggest carmaker, said last month that it’s in talks on selling stakes to Chinese partner Dongfeng and France’s government in an initial step of the 3 billion-euro capital increase to fund a reorganization. Board Chairman Thierry Peugeot and his cousin, Robert Peugeot, have clashed over the strategy, with Thierry favoring selling all the new stock on the market without investments by Dongfeng or France, according to people familiar with the situation.

A French minority shareholders’ association, ADAM, said separately in a letter to Thierry Peugeot this week that Dongfeng, the French state and the Paris-based carmaker’s founding family may be considered as acting together in their proposal, potentially triggering a mandatory offer to buy out the other stockholders.

Stock Rises

Peugeot gained as much as 2.6 percent to 11.50 euros and was trading up 1.7 percent as of 11:49 a.m. in Paris. The stock has climbed 94 percent in the last year, valuing the manufacturer at 4.04 billion euros.

The French company probably lost money for the second year in a row in 2013, according to analyst estimates, as industrywide car sales in Europe, Peugeot’s main market, reached a two-decade low. Peugeot said in January that it’s targeting a formal deal with Wuhan-based Dongfeng and France by the time the company reports full-year earnings on Feb. 19.

The company hasn’t specified the size of the potential stakes Dongfeng and the French state may buy, though it said they may acquire stock first and then further shares would be sold to current investors under “the preferred scenario.” Other alternatives are being considered, Peugeot said.

‘Balanced Ownership’

Any participation by France in a Peugeot capital increase would be intended to “secure balanced ownership of the company, as Dongfeng is a Chinese company controlled by the government,” French Industry Minister Arnaud Montebourg told reporters today in Warsaw. “We want to create a giant with global reach,” and “an alliance with Dongfeng will create a relationship of equals while at the same time preserving decision center and R&D outlets in Europe.”

Discussions center on selling 14 percent holdings apiece to Dongfeng and France, which would each pay at least 750 million euros, according to people familiar with the matter. The Peugeot founding family would also retain 14 percent, down from their current stake of 25.5 percent of the equity and 38.1 percent of the voting rights, the people said.

The boards of the family’s two holding companies, EPF and FFP, signed off last week on the two-step capital increase, according to people familiar with the matter.

GM Ties

Peugeot has burned through more than 4 billion euros in cash in the last two years as deliveries fell amid the European auto-market drop. The new funding would be equal to 75 percent of Peugeot’s market value and follows a 2012 share sale to raise 1 billion euros in which General Motors Co. bought a 7 percent stake that the Detroit-based carmaker later sold.

The French company’s fourth-quarter vehicle sales rose 4.1 percent as growth in China helped stem a full-year delivery drop. Peugeot, which has a goal of selling more than half of its cars outside Europe by 2015, delivered 42 percent beyond its home region last year compared with 38 percent in 2012, it said in January.

Peugeot “has failed for 10 years to go global because of the shareholders structure, the fact that it is controlled by the Peugeot family,” Montebourg said today. “Every other big automaker posts huge profits” with an “international presence, while PSA has limited itself to Europe.”

Dongfeng and Peugeot build cars together at three plants in China. The French manufacturer opened a fourth Chinese factory in late 2013 with a separate local partner, Chang’An Automobile Group, for the Citroen brand’s up-scale DS model line.

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