PARIS Shares in French carmaker PSA Peugeot Citroen (PEUP.PA) fell a further 11.6 percent on Friday, making for a 23 percent fall in just four days, after U.S. alliance partner General Motors (GM.N) sold its stake ahead of a possible new share issue by the struggling French carmaker.
The 7 percent stake, totaling 24.84 million shares, was sold at 10 euros apiece in a private placing with institutional investors, traders said, at the bottom of a range of 10-10.25 euros and at a 5.9 percent discount to Thursday's closing price.
Peugeot shares had lost 7.6 percent on Thursday after the company unveiled a 1.1 billion-euro writedown at its ailing overseas operations and confirmed it was pursuing a tie-up with China's Dongfeng Motor Group (0489.HK) which would be underpinned by a share issue.
The stock was trading at 9.59 euros by 4.40 a.m. EST, valuing Peugeot at 3.4 billion euros ($4.68 billion), a loss of 940 million euros since Monday's close.
Goldman Sachs analysts removed Peugeot from their pan-Europe "conviction buy list" on Friday, citing "increased dilution risk". The broker kept its "buy" rating but cut its target price to 12.1 euros from 16.4.
Peugeot said on Thursday that discussions with Dongfeng were at a "preliminary stage", with no guarantee they would conclude successfully.
But a source familiar with the matter said the carmaker's board agreed on Tuesday to enter final negotiations on an outline deal that would see the French state and Dongfeng take matching 20 percent stakes in Peugeot with a share issue to be priced at below 7 euros a share.
Asked on Friday if the French state would take part in the potential capital increase, Industry Minister Arnaud Montebourg told RMC radio: "I cannot answer your question. Will the question arise? Without doubt. But for now, let the companies discuss between themselves."
He said the government had the ability to sell state holdings in certain companies and invest in others, without being specific.
However, he added: "The red line is that PSA will remain French. That is our position."
General Motors said on Thursday that it would not stand in the way of a deal between Peugeot and Dongfeng, although the U.S. carmaker also said its industrial cooperation with the French group remained strong.
"GM's decision is maybe not so bad insofar as it simplifies the shareholder structure and could facilitate the partnership with Dongfeng," Aurel-BGC analysts said. "Furthermore, GM doubtless didn't want to be massively diluted."
One of the worst casualties of Europe's economic slump and six-year car sales decline, Peugeot is cutting jobs and plant capacity in an attempt to halt losses within two years.
Peugeot and GM lowered savings goals for their reduced alliance on Thursday, but said joint development of compact and small minivans would continue, and that a delivery van program was also being considered.
GM also waived its right to withdraw cooperation in the event of a Peugeot stake sale to a third party, clearing the way for Dongfeng.
Goldman Sachs acted as bookrunner for the Peugeot share placement.
(Additional reporting by Raoul Sachs; Editing by Greg Mahlich)