PSA-Mitsu Deal Doomed By Debt?

Cammy Corrigan
by Cammy Corrigan

A few days ago, TTAC reported that PSA and Mitsubishi were looking to forge closer ties with either a cross holding format, like Renault-Nissan, or by PSA taking a 30-50 percent stake in Mitsubishi. According to Bloomberg, analysts like Oppenheim’s Jens Schattner are ruling out equity acquisitions, saying the two firms should concentrate more on co-operation. “Peugeot doesn’t have the liquidity to take a major Mitsubishi stake in cash” he says, and he’s not the only one splashing cold water on the hook-up. Eric-Alain Michelis, an analyst at Societe Generale adds that PSA may have to issue new shares to pay for that stake in Mitsubishi they want, which will not please the Peugeot family as it will dilute their holding. Otherwise, “raising the finance would not be a walk in the park,” he reminds. Were PSA to issue shares to cover €1 billion of the $3.7billion needed for a 50% stake in Mitsubishi Motors, it would reduce the Peugeot family’s investment to 25%. Quelle horror!

Another potential obstacle are culture clashes. Eric-Alain Michelis uses Daimler’s ownership of Mitsubishi as a case study. “Daimler was running it as if it was a fully owned subsidiary of a German company rather than a Japanese company in which they held a stake,” he says. “The Japanese didn’t like that and it turned into a nightmare.”

PSA has clear goals for the strategic partnership: financial and strategic gains while preserving control for PSA. “These are the three conditions we’ve always set” says Hugues Dufour, a spokesman for PSA. Will PSA raid the cookie jar and check the back of the sofa in order to finance this deal? Or will they just stick to co-operation? Stay tuned.

Cammy Corrigan
Cammy Corrigan

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  • Obbop Obbop on Dec 07, 2009

    Car pic at top of article reminds me of a cell phone. Expect to see it glued to the side of female heads.

  • PeteMoran PeteMoran on Dec 08, 2009

    Can anyone nominate a PSA/Mitsu model they'd want? Lancer Evo is about it. They got nothin'.

  • Mr Carpenter Mr Carpenter on Dec 08, 2009

    Look at the improbable merger of Volvo and Saab which was briefly considered and rejected in the 1970's. Clearly, in hindsight, they should have proceeded ahead. Likewise, instead of a partial BUY OUT, PSA and Mitsubishi should actually merge, along with Suzuki. Just - make - it - work. Swallow the pride and avarace, be honest, straightforward and humble - and do it. So what if the Peugeot family "only" ends up owning 1/5th or 1/6th of the company instead of 1/4th? Newsflash: Owning 1/5th of a properous company likely to survive the current and future turmoil is better than owning 1/4th of a failed company, methinks. Mitsubishi Heavy Industries and Mitsubishi Bank should also retain partial interest of the entire conglomerate, as also should the Suzuki family if indeed they own any substantial proportion of Suzuki. It's called a partnership and I suspect it'll be the only way these three companies will survive past 2020. Perhaps even 2012, that most "magical of years", soon upon us. The global auto industry is NOT going to look the same within a couple of years. The current turmoil is just the beginning, in my humble opinion.