China’s Dongfeng reviews PSA stake sale after fall in share prices

A woman stands next to Dongfeng motor group's SUV vehicle SX6 during the Auto China 2016 show in Beijing, China April 26, 2016. Photo: Reuters

China’s Dongfeng Motor Group is reviewing a deal with PSA to cut its stake in the French carmaker after a fall in share prices sparked by the coronavirus pandemic.

PSA agreed to merge with Italian-American rival Fiat Chrysler Automobiles (FCA) 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 Navistar buyout and Borgwarner’s efforts to clinch a deal with Delphi.

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

Reuters

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.