By David Pearson
PARIS--Europe's second-largest automotive group PSA Peugeot
Citroën Wednesday formally signed a landmark agreement that will
take the company in a new direction and see a Chinese group and the
French state become core shareholders.
The formal event in the gilded reception rooms of the Élysée
Palace culminates a long-negotiated plan that calls for China's
Dongfeng Motor Group and the French state to acquire 14% stakes in
Peugeot by subscribing to a capital increase of at least EUR3
billion ($4.17 billion).
The binding agreement, signed during a state visit to France by
Chinese President Xi Jinping, cements a broad cooperation deal that
hinges on a much-needed capital boost for the financially ailing
group.
The Peugeot family, custodians of a two-centuries-old dynasty,
are giving up control and will see their stake of over 25% diluted
to the same level as the new shareholders.
Peugeot is eager to reduce its dependence on the stagnating
European automobile market, and both it and Dongfeng want to expand
their sales into Southeast Asia and eventually into new markets in
other parts of the world.
The latest midterm recovery plan for Peugeot hinges on the
Dongfeng deal and the injection of capital to shore up the
company's finances. Carlos Tavares, who was hired from rival
Renault SA late last year and will succeed current Chief Executive
Philippe Varin at the end of March, has identified several issues
that need to be fixed if Peugeot is to consistently generate cash
again.
Write to David Pearson at david.pearson@wsj.com
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