PARIS — PSA Peugeot Citroen, Europe’s second-biggest carmaker, agreed to bring in Chinese partner Dongfeng Motor Corp and France as investors as part of a 5.27-billion-euro ($7.26 billion) rescue package.
A worker works in the factory of Dongfeng Peugeot-Citroën Automobile Limited (DPCA) in Wuhan, central China's Hubei province. (Photo by AFP)
Peugeot will shore up financing by selling new stock and warrants and setting up auto-loan joint ventures with Banco Santander SA, the Paris-based manufacturer said today. The carmaker separately renewed a 2.7-billion-euro credit line with banks. Peugeot also said cash consumption last year fell 86%, beating a target of reducing the figure by half.
Dongfeng and the French state will each pay a total of 800 million euros for a 14% stake apiece, accounting for about half of a 3-billion-euro capital increase. The sale would mark a turning point for the 118-year-old carmaker, as the founding Peugeot family loses control for the first time with a reduced holding that would match the new investors' stakes.
"The strengthening and deepening of the existing industrial and commercial partnership with Dongfeng" will "capitalise on the group’s current success in the world’s largest automobile market, which is now the primary source of growth for the automotive industry," Peugeot said in a statement.
The deal is Peugeot’s second attempt in two years to bring in a long-term strategic investor to fund vehicle development and expansion in emerging markets in a bid to restore profit. General Motors Co bought a stake in early 2012 that was unwound after 21 months when savings from cooperation missed targets.
Peugeot, among the producers worst-hit by a contraction in Europe’s auto market to almost a two-decade low, reported a 177-million-euro operating loss in 2013, its second unprofitable year in a row. That was narrower than the 246.8-million-euro average loss of nine analyst estimates compiled by Bloomberg. Operating free cash flow was a negative 426 million euros versus cash burn of 3 billion euros in 2012.
The new stock will be priced at 7.50 euros a share, Peugeot said. The carmaker plans to sell another 770 million euros in warrants carrying the right to shares at the same price. The lending ventures to be set up between the manufacturer's Banque PSA Finance division and Madrid-based Banco Santander, Spain's biggest bank, carry "potential cash upstream" of as much as 1.5 billion euros by 2018, Peugeot said.
Former Renault SA manager Carlos Tavares will succeed Philippe Varin as chief executive officer on March 31, Peugeot also said.
The French company is controlled through a 25.5% equity stake owned by descendants of Armand Peugeot, who set up the automaker in 1896. The family also holds 38.1% of the voting rights.