LONDON/SHANGHAI Nov 15 French carmaker PSA
Peugeot Citroen is preparing for a possible sale of
its Faurecia components division to accompany a tie-up
with China's Dongfeng Motor Group, several sources with
knowledge of the situation said.
The separately listed parts maker has hired an adviser to
explore the sale of Peugeot's 57 percent stake either in the
market, or to a private equity fund or industry peer, said the
sources, who asked not to be named because the talks are
Discussions are at a very preliminary stage, they said, and
remain conditional upon the success of complex negotiations on
Peugeot's deeper tie-up with its existing Chinese partner.
Talks on a 3 billion euro ($4 billion) capital increase, in
which the French government and Dongfeng would each
acquire 20-30 percent of Peugeot, are progressing more slowly
than the troubled carmaker initially hoped, people with
knowledge of the situation said last month.
Little progress has been made since then, they added this
"The talks look pretty much stuck in the mud," one of the
Peugeot and Faurecia both declined to comment on Friday.
The French carmaker is "very eager" to sell a significant
stake to its Chinese partner, but Chairman Xu Ping is not yet
convinced, a source close to Dongfeng said.
Dongfeng would want a stake purchase to yield deeper
strategic benefits than Chinese rival SAIC gained
from a minority holding in General Motors' South Korean
division, formerly Daewoo, the source said.
"Dongfeng doesn't want to be a passive investor," the source
Peugeot is reluctant to sell Faurecia because the profitable
company, based in the western Paris suburb of Nanterre, helps to
support the carmaker's credit rating.
PRIVATE EQUITY INTEREST
But the disposal might be necessary to win European Union
approval and French political acceptance for another government
bailout. France granted 7 billion euros ($9.4 billion) in loan
guarantees to prop up Peugeot's financing arm last year.
Private equity funds including Carlyle, KKR,
CVC and Bain are looking at Faurecia, two sources said,
emboldened by a buoyant debt market and the scarcity of deal
opportunities in Europe.
KKR declined to comment. Carlyle, CVC and Bain did not
return calls and messages seeking comment.
Peugeot is also still in talks to merge its Banque PSA
financial arm with Banco Santander's car loans business
in a deal it hopes to sign in the first quarter of 2014, said a
source with direct knowledge of the matter.
The transaction is taking time because of legal complexities
and Santander's reluctance to take on Banque PSA's existing loan
book, according to people familiar with the situation.
The Spanish bank would prefer to limit the combined
operations to new lending, one said.
"Santander knows they are the only contender for a deal of
that scale, so they have no incentive to compromise," the person