Peugeot Looks to Approve Stronger Dongfeng Tie-Up, Capital Increase
French Auto Maker Looks to Raise €3 Billion
PARIS—French car maker PSA Peugeot Citroën UG.FR +2.89% said Thursday that its board aims to approve terms of a deeper tie-up with Chinese partner Dongfeng Motor Co., as well as a €3 billion capital increase, at a Feb. 18 meeting.
The company, which said last month that it was holding talks with both Dongfeng and the French government over a possible capital increase, said its board met Wednesday and expressed full support for the plan.
The central scenario under discussion calls for Dongfeng and the French state to contribute between a third and half of the €3 billion Peugeot wants to raise, according to people familiar with the negotiations.
The Peugeot family, the group's largest shareholder with a 25.4% stake, would spend €80 million to €120 million to buy some of the newly issued shares and avoid being diluted too much, these people said.
The company would make an additional public rights issue to make up the required amount, they said.
Upon completion of the transaction, Dongfeng, the state and the family would hold roughly equal stakes, they said.
At stake is how to provide the loss-making company with the financial means to pursue the heavy industrial, R&D and commercial investment it needs to ensure its future and bolster its presence in overseas markets.
Officials at Dongfeng couldn't be reached immediately for comment.