Reuters has reported that Chinese automaker Dongfeng and the French government will be taking equity stakes in PSA/Peugeot-Citroen after injecting $4.1 billion into PSA. Under the draft agreement, which is still being negotiated, Dongfeng Motor and the French government will each put 1.5 billion euros into the French automaker, with each of those parties getting a 20 to 30 percent share in the company.
As a result, the Peugeot family, which currently owns 25.4% of PSA, will find its holdings diluted below controlling levels. The sale will also dilute General Motors’ 7% share of PSA. Part of the increased capitalization will come from a sale of stock to the French government by the Peugeots, while the remainder will be raised through a reserved capital increase. The 3 billion euros put into PSA would be the equivalent of 68% of the company’s current market value.
PSA sales were down 18% in August, and its market share has dropped to 11% so far this year, almost a full percentage point decline. The company lost 5 billion euros ($6.6 billion) last year. In July PSA announced that it expected to reduce the cash burn in 2013 to 1.5 billion euros.