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China's Dongfeng reviews PSA stake sale after price fall

BEIJING (Reuters) - China's Dongfeng Motor Group 0489.HK is reviewing a deal with PSA PEUP.PA to cut its stake in the French carmaker after a fall in share prices sparked by the coronavirus pandemic.

FILE PHOTO: The logo of PSA Group is seen during the annual results news conference in Rueil-Malmaison, near Paris, France, February 26, 2020. REUTERS/Benoit Tessier

PSA agreed to merge with Italian-American rival Fiat Chrysler Automobiles (FCA) FCHA.MI in December to create the world's fourth-biggest carmaker by sales volume.

Dongfeng had agreed to lower its 12.2% stake in PSA by selling 30.7 million shares to the French firm to help smooth this process. The stake being was worth around 680 million euros ($744 million) and the sale will leave Dongfeng holding around 4.5% of the merged PSA-FCA group.

However, in an earnings call with investors a Dongfeng official said that the Chinese company was reviewing this.

“There are possibilities that the stake sale plan will change. We are evaluating the issue,” the official said during the call on Tuesday, a recording reviewed by Reuters showed.

“This is closely related to their (PSA’s) merger talks with FCA, so we are also in close talks with them,” the official said, without elaborating on how its stake plan will change.

Dongfeng did not immediately respond to a request for comment from Reuters on Thursday, while PSA and FiatChrysler both declined to comment.

A document seen by Reuters showed Dongfeng and PSA plans to cut jobs at Wuhan-based DPCA and reduce its number of car plants to try to make the joint venture more profitable.

The coronavirus pandemic has roiled stock and debt markets, stalling transactions including VW truck unit Traton's VOWG_p.DE Navistar NAV.N buyout and Borgwarner's BWA.N efforts to clinch a deal with Delphi DLPH.N.

PSA and FCA said in December they expected their deal, which needs U.S. regulatory approval, to close in 12 to 15 months.

Reporting by Yilei Sun and Norihiko Shirouzu; Additional reporting by Giulio Piovaccari in Italy and Gilles Guillaume in France; Editing by Jason Neely, Edward Taylor and Alexander Smith

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