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Dongfeng Is Poised to Sell Down Stake in Peugeot Maker

Updated on
  • Chinese company selling stake as part of PSA-Fiat deal
  • Dongfeng’s stake in combined Fiat-PSA set to be below 5%

PSA Group’s Chinese shareholder is poised to sell some of its 12% stake in the Peugeot manufacturer as part of the carmaker’s planned merger with Fiat Chrysler Automobiles NV, according to people familiar with the matter.

The buyer of shares owned by Dongfeng Motor Corp. will be PSA, and the Chinese company’s stake in the combined Fiat-PSA is dropping to 4.5%, the people said, who asked not to be named because the information isn’t public. The sale could lead to the dismantling of Dongfeng and PSA’s joint venture in China, one person said.

Representatives of Dongfeng, PSA and Fiat declined to comment. Dongfeng is one of PSA’s biggest shareholders along with the French state and the Peugeot family. Shares of Dongfeng were halted in Hong Kong on Wednesday pending an inside information announcement.

Dongfeng’s stake in PSA has attracted attention because of the possibility it could interfere with U.S. regulatory approval for the deal. U.S. economic adviser Larry Kudlow said last month the Trump administration intends to review the proposed merger because of the Chinese carmaker’s stake in the combined company.

PSA and Fiat sketched out their plan six weeks ago to create a regional powerhouse. The companies’ boards on Tuesday approved a merger of the Italian-American and French manufacturers to create the world’s fourth-biggest carmaker, people familiar with the situation said.

Fiat and PSA Boards Sign Off on Merger of Automotive Dynasties

Dongfeng got its 12% holding in PSA as part of a 2014 deal that gave struggling PSA better access to the Chinese market.

Under the preliminary terms of the deal with Fiat, the Peugeot family would be able to increase its stake in the new company by buying shares from France or from Dongfeng.

— With assistance by Ania Nussbaum, Tommaso Ebhardt, Ying Tian, and Daniele Lepido

(Updates to add that PSA is the buyer starting in second paragraph)