PARIS -- PSA/Peugeot-Citroen's board approved an outline deal to raise 3 billion euros ($4.1 billion) by selling stakes in the automaker to China's Dongfeng Motor and the French government.
The deal, if completed, would represent a defining moment in the history of the automaker, which has been controlled by the Peugeot family since it was founded in 1896. It would result in Dongfeng, the French government and the Peugeot family each holding 14 percent stakes in PSA, according to reports.
After a five-hour meeting on Sunday, PSA's supervisory board agreed to a two-stage recapitalization that would be evenly split between a rights issue to existing shareholders and a subsequent issue of additional shares on the market, Les Echos newspaper said on Monday in a report.
Later on Monday, PSA issued a statement confirming that the automaker is considering a 3 billion euros capital increase. It said under its preferred scenario, PSA would implement a capital increase reserved to Dongfeng followed by a rights offering in which Dongfeng would participate. The French government may also participate in these two capital increases on the same terms and conditions as Dongfeng, the statement said.
Les Echos said Dongfeng and the French government each would inject about 750 million euros to acquire 14 percent stakes at a price between 7.50 euros and 8 euros a share, diluting the Peugeot family's holding to 14 percent from the current 25 percent.
PSA would then hold a rights issue of about 1.4 billion euros for the rest of the funding. In addition, the Peugeot family would invest about 100 million euros to maintain its stake at 14 percent.
PSA CEO Phillipe Varin is seeking to finalize the deal by Feb. 19, which is when the automaker is due to announce its 2013 annual results.
According to French press reports, the Peugeot family was divided over the extent of its participation in the capital increase and the size of the stake sale to Dongfeng.
PSA Chairman Thierry Peugeot resisted a capital increase involving Dongfeng and the French state. He argued that the appointment of Carlos Tavares as PSA's next CEO and the improvement in Europe's car market would help the company to raise 3 billion euros entirely through a public rights issue. Tavares, formerly Carlos Ghosn's No. 2 at Renault, joined PSA on Jan. 1. He will succeed Varin, 61, later in this year.