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Dongfeng’s 14% stake in PSA paves way to R&D synergies
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Dongfeng Motor Group Co will acquire a 14 percent stake in its joint venture partner PSA Peugeot Citroen for 800 million euros (US$1.1 billion) in what might become the Chinese automaker’s largest overseas takeover.
The investment is part of the French automaker’s 3-billion-euro capital increase, according to a source close to the deal, whose announcement is set to be made today.
The deal, at a cost of about 7 euros per PSA share for Dongfeng, will offer an opportunity for the second-biggest carmaker in China to seek more synergies in research and development with the French company, a pioneer of a fuel-efficient technology called Hybrid Air. Their current joint business is set to expand beyond China to Southeast Asia.
The French government will inject the same amount of cash as Dongfeng into PSA, with the remaining 1.4 billion euros to be raised through a rights issue.
As a result, the Peugeot family, the current biggest shareholder, will lose control over the company it founded in 1810 as it sees its 25 percent stake and 38 percent in voting rights diluted to the same level as that of Dongfeng and the French state. All the three parties will adhere to restrictions on future stake increases.
As one of the biggest casualties of Europe’s auto market downturn with 510 million euros in operating losses for the automotive division in the first half of last year, PSA has been exhausting measures to shore up its battered balance sheet.
PSA sold 557,000 units in China, up 26.1 percent, while its 2013 global sales fell 4.9 percent to 2.82 million units. PSA aims to lift its business outside Europe from 42 percent last year to 50 percent in 2015. PSA will boost annual output capacity in China to 1 million units to cater to Asia.
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