Peugeot shares plunge as Dongfeng tie-up announced

Shares in French carmaker PSA Peugeot Citroën plunged 5.44 per cent on Monday, following the announcement of a radical tie-up its capital with Chinese Dongfeng and the French state.  The plan would mean a three-billion-euro capital injection.

Maxime Picat, Head of Peugeot Brand, poses near a Peugeot 308, 20 January 2014. Reuters/Jacky Naegelen

The deal, which is expected to be presented to investors on 19 February, will open the door to a difficult three-way partnership, where Chinese state-owned carmarker and the

French state will take over 14 per cent each of the PSA capital while the Peugeot family will reduce its from 35 to 14 per cent.

Both the Chinese and the French states will boost PSA capital and inject 750 millions euros each.

The new shares will be issued at 7.5-8.0 euros.

Peugeot Citroën is the second-biggest carmaker in Europe after Volkswagen but the economic crisis had hit the carmaker hard.

For the third year in a row it was unable to achieve 50 per cent of its sales outside Europe. 

PSA announced a 4.9 per cent fall in sales to 2.82 million vehicles in 2013.