Feb. 28 (Bloomberg) -- PSA Peugeot Citroen plans a 1 billion-euro ($1.34 billion) rights offering to raise cash as debt increases, people familiar with the matter said.
General Motors Co. will buy about 7 percent of the French carmaker and take part in the new share sale, the people said, declining to be identified discussing private talks. The Peugeot family, which owns 30 percent of the company as its biggest shareholder, agreed to participate in the rights offer, one of the people said.
Peugeot, Europe’s second-biggest automaker after Volkswagen AG, announced plans this month to sell assets as debt more than doubled in the second half to 3.4 billion euros. Peugeot and GM, the world’s largest carmaker, are planning an alliance that may include developing engines and building vehicles together in Europe, a person familiar said last week. GM is looking for ways to turn around its unprofitable Opel brand in Germany.
“It signifies just how bad the situation must be for them,” said Erich Hauser, a London-based Credit Suisse analyst, who has an “underperform” rating on the stock. With the rights issue, which could dilute current shares by about 30 percent, and the planned asset sales, “future earnings power is now fundamentally impaired on a permanent basis.”
Peugeot dropped as much as 55 cents, or 3.6 percent, to 14.76 euros and was down 2 percent as of 3:42 p.m. in Paris trading. The shares erased earlier gains of as much as 9.6 percent.
Peugeot spokeswoman Cecile Damide declined to comment today. Klaus-Peter Martin, a GM spokesman, declined to comment yesterday.
--With assistance from Jeffrey McCracken in New York, Jacqueline Simmons in Paris, Chris Reiter in Berlin, Alex Webb in Frankfurt, Tommaso Ebhardt in Brussels and Tim Higgins in Southfield, Michigan. Editors: Chad Thomas, Heather Harris.
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