* Peugeot reaches outline deal with Dongfeng, France
* Talks continue over chairman nomination -sources
* Memorandum of understanding to be finalised Feb. 18
(Adds details, background)
By Sophie Sassard, Laurence Frost and Gilles Guillaume
PARIS, Feb 12 PSA Peugeot Citroen has
reached an outline deal with Dongfeng and France to
raise up to 4 billion euros ($5.5 billion) in fresh capital and
deepen cooperation with the Chinese carmaker, sources familiar
with the matter said.
The agreement is due to be presented to the Peugeot board on
Feb. 18 and likely signed as a non-binding memorandum of
understanding the same day, according to three sources with
direct knowledge of the situation.
Peugeot, battered by Europe's prolonged auto demand slump
and sustained by 7 billion euros of state guarantees, needs a
cash infusion to stay afloat. The planned share sale to Dongfeng
and the French government may be its last survival hope after
the failure of earlier deal talks with U.S.-based General Motors
The accompanying industrial plan would see Peugeot and
Dongfeng retain and expand their existing joint venture,
increasing research and development cooperation with a view to
expanding into South East Asian markets, according to the
sources, who declined to be named because the talks were
Peugeot has been in talks with Dongfeng for months over a
rescue plan that would see the Chinese automaker and French
government take matching stakes of about 14 percent each.
With most details now agreed - including a heavily
discounted 7.50 euro issue price for the two new shareholders -
the choice of a new independent chairman is the main outstanding
point to be resolved, several sources said. Peugeot shares
closed at 12.52 euros on Wednesday.
The French government is pushing Louis Gallois, a senior
civil servant who joined the Peugeot board on a nominally
independent ticket as a condition of the existing state
guarantee in place since 2012, the sources said.
But Dongfeng is resisting his nomination and rooting instead
for prominent French businesswoman Patricia Barbizet, another
independent Peugeot director.
A spokeswoman for Barbizet did not immediately return calls
seeking comment. Peugeot declined to comment on the deal talks
with Dongfeng. Representatives of Wuhan, China-based Dongfeng
could not be reached.
Under the terms, to be announced with its full-year results
next week, Peugeot will raise 3 billion euros through the
reserved share sale to Dongfeng and the French government and
through a smaller, subsequent rights issue to existing
Current shareholders will also receive warrants to purchase
additional stock at an equivalent price in an operation that may
raise as much as 1 billion euros more, one source said.
French deal negotiators returned this week from China after
a final round of substantive talks with state-owned Dongfeng, he
The French carmaker said on Jan. 20 it was engaged in
discussions on a deeper Dongfeng partnership backed by a 3
billion euro capital increase and warrants issue.
Trading in Dongfeng shares was briefly suspended on Monday
as the Chinese carmaker also confirmed the talks in a statement.
($1 = 0.7312 euros)
(Reporting by Sophie Sassard, Laurence Frost and Gilles
Guillaume; editing by Keiron Henderson and Andrew Callus)