Peugeot State Stake Accord Gets Initial EU Backing, France Says

Feb 20, 2014 3:17 am ET

Feb. 20 (Bloomberg) -- PSA Peugeot Citroen, Europe’s second-biggest carmaker, got initial regional regulatory backing on its agreement to sell a stake to its home government, a French official said.

French Finance Minister Pierre Moscovici received a letter from European Competition Commissioner Joaquin Almunia, who indicated that the proposal “at first glance” complies with European Union rules related to state aid, a ministry spokeswoman, commenting on condition of anonymity in line with government rules, said by phone.

Peugeot outlined plans yesterday for a 3 billion-euro ($4.11 billion) capital increase in which Chinese partner Dongfeng Motor Corp. and the French state will contribute about half the money in exchange for stakes of 14 percent apiece. The new funding will help the Paris-based manufacturer to overhaul its lineup, invest outside Europe and reduce debt.

Earlier financial backing for the carmaker includes a 7 billion-euro French government guarantee of new bonds issued by the company’s Banque PSA Finance car-loan unit. EU authorities have approved the guarantee.

French newspaper Les Echos reported on Almunia’s letter in its online edition late yesterday. Antoine Colombani, a spokesman for the European Commission in Brussels, didn’t immediately respond today to a call and an e-mail seeking comment.

--With assistance from Aoife White in Brussels. Editors: Tom Lavell, Chad Thomas