PSA-Donfeng Deal Injects New Capital, Extended Life Into Peugeot

The 3 billion euro ($4.1 billion USD) three-way deal between PSA Peugeot Citroen, Dongfeng and the French government, signed this week, is set to inject new capital and a much needed life extension for Peugeot, though at the expense of the Peugeot family ceding control after two centuries.

Reuters reports Dongfeng and the French government will each pay 800 million euros ($1.10 billion) for a 14 percent stake in the new alliance while existing shareholders will receive warrants entitling them to purchase new stock at 7.50 euro, ultimately adding 1 billion euros to the memorandum of understanding signed by the three parties. In return, the Peugeot family’s 25.4 percent stake and 38 percent of voting rights in their namesake company will be brought to parity with their new partners, ceding control after over 200 years of business while surviving the end of guarantees totaling 7 billion euros next year.

Aside from the new infusion of capital, the MOU calls for Peugeot and Dongfeng to sell 1.5 million units annually beginning in 2020, jointly establish an R&D center in Dongfeng’s home market, and consider a new sales wing focused specifically upon Southeast Asia. The third point in the MOU would allow Peugeot to fare better than it does currently, having only sold 6,500 units last year in its largest regional market, Malaysia.

As for Peugeot’s home market and the European market as a whole, analysts warn the MOU doesn’t address how Peugeot will address the ongoing problems the automaker has undergone over the past several years. Though some suggested freezing investments and selling more plants to save itself, French industry minister Arnaud Montebourg stated no further closures were “on the agenda.”

The deal will be formally signed in late March around the time of China’s president Xi Jinping visit to Paris.