Peugeot raises capital in crisis action to tie-up with Dongfeng
By Laure Fillon, AFPPARIS--French auto group Peugeot Citroen is launching radical crisis action, raising capital to tie-up with Chinese group Dongfeng and the French state, but its shares plunged on Monday.
January 21, 2014, 12:09 am TWN
The supervisory board of PSA Peugeot Citroen agreed on the capital restructuring on Sunday following the exit of U.S. giant GM, sources close to the matter told AFP.
But newspaper reports said that the capital increase would be big at about 3.0 billion euros (US$4.0 billion) relative to the group's value on Friday of about 4.1 billion euros.
And the new shares enabling Dongfeng and the government each to acquire about 14.0 percent of the group would be made at a discount of up to 35.0 percent.
Shares in PSA Peugeot Citroen plunged by 5.44 percent 10.86 euros in initial trading on Monday.
Under the reported terms, the Peugeot family, the controlling shareholder with 25.4 percent of the capital, would retain an interest of 14.0 percent by means of subscribing for shares worth 100 million euros.
The exact amount of subscription by each party would depend on the amount of shares offered to the public and on the price of the shares, a source close to the matter said.
The reports said that the new shares would be issued at 7.5-8.0 euros each, enabling the French state and Chinese group Dongfeng to inject about 750 million euros.
On Friday the price of shares in the group had closed at 11.48 euros.
The French group, the second-biggest automaker in Europe after German giant Volkswagen, also announced a 4.9-percent fall in sales to 2.82 million vehicles last year on weakness in its main markets in Europe and Russia. That was in addition to a suspension of its important business in Iran owing to sanctions.
But sales outside Europe rose from 38.0 percent of the total in 2012 to 42.0 percent in line with the “objective of achieving 50 percent of sales outside Europe in 2015.”
The latest figures reflect a recent deep crisis in the European car market, now showing signs of easing, a crisis which put Peugeot on its knees recently, and the findings of a government-ordered enquiry which found that the group had made strategic mistakes for years by not seizing fully the opportunities of globalization.
Peugeot has already in effect been rescued by a 7 billion euros of state-guaranteed refinancing for its credit arm. The group has cut thousands of jobs and closed a factory in France.
At the height of the global financial crisis which battered the U.S. and European car markets, General Motors, itself in the throes of radical restructuring from bankruptcy, tied up with Peugeot by taking a stake of 7.0 percent.
That was to get a strategic boost from Peugeot's expertise in small cars and to bolster its lame duck brand Opel in Europe.
French State 'vigilant'
The sources close to the matter said that the meeting of the supervisory board rejected an alternative to offer new shares to the market without reserving stakes for Dongfeng and the French state, a proposal supported by board chairman Thierry Peugeot.
French Finance Minister Pierre Moscovici told Radio J on Sunday that “the state is particularly vigilant, the state feels involved, and the state will do everything, will make its weight felt, so that Peugeot continues to be a big French manufacturer, and even finds ways to develop.”