Dongfeng Motor to buy 14% stake in PSA Peugeot Citroen

Published on February 20, 2014 by Joey Wang

Dongfeng Motor to buy 14% stake in PSA Peugeot Citroen

Dongfeng Motor is to pay approximately 800 million euro ($1.1 billion) for a 14% stake in PSA Peugeot Citroen, the leading French carmaker, while the French government is expected to acquire an equal stake.

As a result, Dongfeng Motor, the French government and the Peugeot family will hold the same number of shares in Peugeot. A new committee overseeing Asia development will be created in the supervisory board of Peugeot, to be chaired by a representative of Dongfeng.

The memorandum is pending approval from the Chinese authorities. Peugeot is entitled to terminate the deal if it fails to get all the signatures and stamps required before April 30.

In addition to the memo, the announcement also cited further cooperation in Dongfeng Peugeot Citron Automobile Company Ltd, a joint venture owned by the two carmakers in China. The two will “enhance the research and development capabilities of the entire value chain and strengthen overseas cooperation to achieve the objective of selling 1.5 million vehicles under the Dongfeng, Peugeot SA and Citron brands each year starting from 2020,” the announcement said.

A legally binding agreement is expected by the end of March for a joint research and development center in China. A new export company is also planned to explore markets in Asia-Pacific especially the ASEAN region.

The deal, which follows months of talks and remains subject to a Peugeot shareholder vote, is likely to be signed formally during Chinese President Xi Jinping’s visit to Paris in late March, sources say.

The deal can help Dongfeng “diversify its brands to ease reliance on Japanese brands as Dongfeng Nissan and Dongfeng Honda account for nearly half of its total vehicle sales,” said Yonghuo Liang, an analyst with Haitong International Research.

Industry experts have cast doubt over how much engineering know-how Peugeot will share with Dongfeng given the lengthy negotiations Geely had to undertake to convince Volvo to make technology available even though it owned 100 percent of the Swedish brand.

In the end the European carmaker only parted with platform technology that it had decided to retire. The two companies recently agreed however to jointly develop small-car technology.

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