Peugeot family approves draft Dongfeng deal: sources

Mon Feb 17, 2014 3:22pm EST
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By Gilles Guillaume and Laurence Frost

PARIS (Reuters) - PSA Peugeot Citroen's (PEUP.PA: Quote) founding family gave the go-ahead on Monday for a 3 billion euro ($4.1 billion) tie-up with China's Dongfeng (0489.HK: Quote) that would draw a line under one of France's oldest industrial dynasties, sources said.

The boards of Peugeot family holding Etablissements Peugeot Freres and its FFP FFPP.PA subsidiary signed off on the capital increase plan to be announced by the French carmaker on February 19, two people with knowledge of the meetings said.

The two holding companies approved "all of the proposals" negotiated with Dongfeng and the French state, one source said.

Peugeot and Dongfeng Motor Group have been in talks for months over a rescue deal that would see the Chinese automaker and French government take matching 14 percent stakes. The plan is due to be approved by Peugeot's own board on Tuesday and announced the following day, sources have said.

A separate agreement to create a European sales financing alliance with Banco Santander (SAN.MC: Quote) is due to be unveiled simultaneously, according to people with knowledge of the plans.

A Peugeot spokesman declined to comment on the discussions.

Among the worst casualties of Europe's six-year market slump, Peugeot is being kept afloat by 7 billion euros in state guarantees to its sales financing arm that expire next year.

Under the deal, Peugeot plans to sell new stock to Dongfeng and the French state priced at 7.50 euros, a 41 percent discount on Monday's 12.79 euro closing price, followed by a rights issue to existing shareholders, sources have said.   Continued...

Employees work at a production line of a Dongfeng Peugeot Citroen Automobile factory in Wuhan, Hubei province, February 13, 2014. REUTERS/Stringer