In an open letter to PSA Peugeot Citroen’s chairman Thierry Peugeot, an analyst has suggested pulling back from an imminent recapitalisation deal under which Dongfeng will take an equity stake in the troubled automaker.
Bernstein Research analyst Max Warburton penned the open letter in a research note ahead of a planned meeting of the company’s Supervisory Board scheduled for tomorrow (February 18) at which the deal could be rubber-stamped and announced.
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Warburton noted in his open letter that Dongfeng was “acting like a reluctant saviour” and maintained that “PSA simply doesn’t need the money – it has cash on hand”. Moreover, he suggested that the company could sell Faurecia and has the potential to follow Renault’s example and “squeeze working capital hard”.
The letter asked Thierry Peugeot, “to be bold, to avoid selling equity too cheaply and to remain independent.”
Warburton also said that his team rates Peugeot as an ‘Outperform’ and that they believe it has “good upside” with even more potential if it went alone.
The open letter also noted that PSA’s “efforts to find a strong industrial partner have failed (farewell GM)”. It added: “You now preside over a company that appears to have gone to China, bowl in hand, to ask for money and support from Dongfeng. The Chinese appear to be tough negotiators and are proving to be less generous than your management team had originally hoped. But it doesn’t have to be like this. Before you let them give away a large part of Peugeot – and France’s car industry – to China, please read this note. Perhaps it’s not too late.”
The note also said that PSA can raise money via other routes and that PSA has “far less debt than Fiat”.
