Peugeot board agrees tie-up with Dongfeng

FRENCH car manufacturer PSA Peugeot Citroen has taken a decisive step towards a tie-up with China’s Dongfeng as the board approved the outline of a contentious survival plan that divided the founding Peugeot family.

In a blow to chairman Thierry Peugeot, who had championed an alternative plan, the board agreed in principle to a capital increase that would see the Chinese state-owned car maker and French government acquire minority stakes and the family cede control, sources familiar with the matter said yesterday.

Peugeot executives declined to comment on the Dongfeng negotiations as they unveiled a further 4.9 per cent decline in global vehicle deliveries for 2013.

The company’s shares fell as much as 9.8 per cent on news of the board decision to press ahead with the planned deal, which includes the issue of €3bn (£2.5bn) in new stock that would dilute existing shareholders.

“We’re sceptical about this kind of plan – a very dilutive capital increase for a weak industrial project,” said Florent Couvreur, a Paris-based analyst with CM-CIC Securities.

The operation would leave “three main shareholders with conflicting objectives”, Couvreur added in a note to investors. “This is a rejection for chairman Thierry Peugeot.”

Peugeot has said it will need fresh funding to stay competitive and has spent months pursuing talks on a deeper relationship with Dongfeng, its existing partner in a Chinese joint venture.