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Published on : Feb 19, 2014

The French automaker PSA Peugeot Citroën has been struggling for some time now. However, the company could soon see better days with Chinese auto manufacturer Dongfeng Motor and the government of France deciding to inject capital into the struggling automaker. The announcement was made by on Wednesday by Dongfeng as it filed in Hong Kong.

Nearly 25.4% of Peugeot’s shares are currently held by the Peugeot family that has decided to allow its shares to be brought down to 14%, according to an agreement signed on Monday, said a source close to the matter.

With the family stake being reduced, it has now paved the way for the company’s board to initiate a rescue plan that will see finance being injected by the aforementioned entities. The source requested not to be named given that the proceedings of the board meeting were private.

The meeting saw the company’s board voting unanimously for the new strategy. Under this plan, Peugeot will issue USD 4.1 billion in the form of new shares, and the French government as well as Dongfeng will each purchase a part of the shares, following which each of them will have a 14% stake.

While filing at the Hong Kong Stock Exchange, Dongfeng provided more details pertaining to the deal, where it emerged that the total deal was worth about 3 billion euros in all. 

Peugeot will receive funds of nearly 524 million euros each from the Chinese automaker and the French state. This will be done via an increase in the share capital of Peugeot priced at 7.50 euros per share. This marks a steep discount of nearly 40% from the closing share price of Peugeot on Thursday.

Moreover, the French carmaker will raise a further 800 million euros via warrant issue to its existing shareholders.