Dongfeng 800 million Euro to acquire 14% of PSA Peugeot Citroe ̈ n and become the largest shareholder

On February 18, 2014, the joint stock company of Dongfeng Motor Group, the French government, the holding company of the Peugeot family and the Peugeot Citroe ̈ n Group officially signed a memorandum of understanding. The joint stock company of Dongfeng Motor Group will inject about 800 million euros into Peugeot Citroe ̈ n. After the transaction is completed, Dongfeng Motor will join the French government and the holding company of the Peugeot family to become the joint largest shareholder of the Peugeot Citroe ̈ n Group, ending the Peugeot family’s controlling position in the Peugeot Citroe ̈ n Group. The formal agreement will be signed during the visit of the Supreme Leader to France next month.

Dongfeng Motor will become the largest shareholder of the Peugeot Citroen Group

Peugeot Citroe ̈ n is Europe’s second-largest automaker after Germany’s Volkswagen, with strong heritage and technical strength. After the subprime mortgage crisis in 2008, the European auto industry sales crisis hit Peugeot Citroe ̈ n hard, and the loss of up to 5.01 billion euros in fiscal 2013 has pushed it to the brink of bankruptcy. The company currently only relies on the French government’s 7 billion euro guarantee for the sales financing division to continue operations, but this rescue will expire next year, so the sale of shares is the last chance for Peugeot Citroe ̈ n to survive.

PSA Peugeot Citroe ̈ n said it had held talks with General Motors of the United States, but failed to reach an agreement. Dongfeng Motor began negotiating with PSA Peugeot Citroe ̈ n about the stake acquisition in June 2013, which took more than eight months, during which the two sides repeatedly played games over the content of the negotiations. Negotiations between the two sides have been hampered by the French government’s reluctance to see PSA controlled by a Chinese state-owned enterprise, and various factors such as the transfer of core technology.

PSA Peugeot Citroen is the second largest automaker in Europe

According to Reuters sources, Peugeot Citroe ̈ n plans to sell new shares to Dongfeng Motor and the French government for 7.50 euros per share, a 41% discount to the company’s closing price on Monday. In addition, Peugeot Citroe ̈ n will also issue new shares to existing shareholders, raising a total of 3 billion euros.

According to the final memorandum of understanding, Dongfeng Motor Group’s joint stock company and the French government intend to inject about 800 million euros each into the Peugeot Citroe ̈ n Group, and the holding company of the Peugeot family will also participate in the capital increase. After the completion of this transaction, Dongfeng, the French government and the holding company of the Peugeot family will become the joint largest shareholder of the Peugeot Citroe ̈ n Group, with each holding about 14%. This means that the Peugeot family’s controlling position in Peugeot Citroe ̈ n will end, forming a situation where the three major shareholders hold the same proportion of share capital.

Dongfeng and PSA Peugeot Citroe ̈ n Group also signed a framework agreement to strengthen cooperation in industrial and commercial fields. In the future, Dongfeng and PSA Peugeot Citroe ̈ n Group will increase cooperation in technology research and development, procurement, manufacturing and marketing, increase the scale of the platform, expand the scale effect of the core powertrain, improve the research and development capabilities and levels, and implement strategic synergies across the value chain to further enhance the international competitiveness of Dongfeng and PSA Peugeot Citroe ̈ n Group.

After the signing of the memorandum of understanding and framework agreement, the shareholders of all parties will realize joint decision-making management in the whole value chain of technology research and development, procurement, manufacturing and marketing of PSA Peugeot Citroe ̈ n Group. Based on the consensus reached, Dongfeng and PSA Peugeot Citroe ̈ n Group will further deepen the cooperation in the whole value chain on a global scale. The cooperation plan includes the establishment of a research and development center in the whole value chain in China, dedicated to the joint development of new automotive technologies and new products, mainly providing R & D services for Dongfeng, PSA Peugeot Citroe ̈ n and Shenlong Automotive. The two sides established an overseas sales company to be responsible for the sales and service business of PSA Peugeot Citroe ̈ n and Shenlong Automotive products in Asia, especially in ASEAN, and to coordinate in other overseas markets. The final formal agreement will be signed when the Supreme Leader

The technology, platform and engine level of the Peugeot Citroen Group have considerable skills

Zhu Fushou, general manager of Dongfeng Motor, previously said that investing in Peugeot Citroe ̈ n can bring advanced technology and other richer resources. In this regard, many industry experts believe that Dongfeng Motor’s investment in Peugeot Citroe ̈ n is not a simple equity acquisition, but to accelerate the globalization of Dongfeng brand through participation in the operation of multinational companies. The signing of the memorandum of understanding and framework plan confirms Dongfeng’s "multinational" strength.