Exclusive: PSA in capital hike talks with Dongfeng, France - sources

Sat Oct 12, 2013 8:17am EDT
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By Sophie Sassard

PARIS (Reuters) - PSA Peugeot Citroen (PEUP.PA: Quote) is preparing a 3 billion euro ($4.1 billion) capital increase in which Chinese partner Dongfeng and the French government would take matching stakes in the carmaker, people with knowledge of the matter said Friday.

A French delegation of executives, government officials and bankers is heading to China for talks to prepare an outline for a deal that could be signed within weeks, three sources said.

They asked not to be identified because the negotiations are confidential.

Under the draft agreement, which Peugeot hopes to conclude this year, state-owned Dongfeng Motor Co Ltd (0489.HK: Quote) and the French government would each contribute 1.5 billion euros and acquire 20 to 30 percent of the carmaker, the people said.

The Peugeot family would lose control of the company because the cash injection would dilute its 25.4 percent stake and 38.1 percent in voting rights.

The capital increase would be accompanied by an expansion of DPCA, the Peugeot-Dongfeng joint venture in China, adding more Peugeot vehicles and technology to target other markets in the region, the sources said.

Peugeot, among the worst casualties of a six-year European car sales slump, is seeking more cooperation with Dongfeng or another automaker as it struggles to cut costs and losses that have threatened its survival.

"Peugeot confirms it is studying new industrial and commercial projects with different partners, as well as the financing to accompany them," a company spokesman said, declining to elaborate. "None of these plans have yet reached an advanced stage."   Continued...

Employees work in the assembly line of the Peugeot 208 at the PSA-Peugeot Citroen plant in Poissy, near Paris, May 15, 2013. REUTERS/Gonzalo Fuentes