France’s government has confirmed it will inject EUR800m (US$1.1bn) into PSA Peugeot-Citroen with Chinese partner, Dongfeng, contributing the same amount in a capital increase worth EUR3bn.
The long-expected news comes on the same day (19 February) as PSA announced an operating loss for 2013 of EUR177m, but the Group is expecting some EUR400m of synergy savings from its deeper tie-up with Dongfeng.
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The deal will see the French state, Dongfeng and the Peugeot family group each own around 14% of PSA’s share capital, with each of the three to be represented by two members in a Supervisory Board.
Questions have been raised as to the independence of PSA with greater Chinese involvement but the French government is stressing the three main shareholders will not act together.
Each of them will be represented by two members on the supervisory board which will have no more than 14 participants and will be chaired independently.
A joint statement released by France’s finance and economic redevelopment ministries noted: “Pierre Moscovici and Arnaud Montebourg welcome this operation, which will bring stability to the group and contribute to its development.
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By GlobalData“This operation, to the satisfaction of all parties involved, will ‘comfort’ the company and its industrial footprint in France, while fostering PSA’s expansion on new markets abroad.
“The industrial and commercial framework agreement with Dongfeng will enable PSA to accelerate its international development and support its long-term growth. The capital increase will give the group a full financial capacity to implement its strategic development plan.”
There had been rumours of a rift within the family although today’s statement noting it was to the “satisfaction” of everyone involved may stifle those whispers.
PSA is also confirming the appointment of Carlos Tavares, who will take over from Philippe Varin as president from 31 March.
From 20 February, Tavares will also assume responsibility for group operations.
The capital increase is subject to administrative and regulatory approvals by French and Chinese authorities and has to be approved by an extraordinary general meeting of PSA shareholders.
Dongfeng was not immediately available for comment.
