Dongfeng approval! The world’s third largest auto group on the agenda

In 2019, the merger of PSA and FCA is undoubtedly a major event in the industry. After all, the merger of the two auto groups will become the third largest auto group in the world. However, due to various adverse factors, the merger plan of the two groups has been put on hold and has not yet been realized, including the reason that Dongfeng Motor has played an important role.
In October last year, PSA group and FCA group announced that they would carry out a comprehensive merger with 50:50 shares to expand scale and cope with high cost investment in new technology and slowing market demand. The merger agreement signed in December of the same year will complete the merger within 12-15 months. If the merger is formally completed, it will become the fourth largest auto group in the world in terms of sales volume and third in revenue, after Volkswagen Group and Toyota Motor.
However, as the global economic market is attacked by the new crown epidemic in 2020, the share price of PSA has dropped from 22 euro (about 171 yuan) at the end of 2019 to 12.39 euro (about 95 yuan) per share (closing price on April 27). Dongfeng Motor Co., as PSA group, holds the largest proportion of shareholders as the French government and Peugeot family, among which Dongfeng Motor Co., Ltd Automobile accounts for 12.23% of the shares, so Dongfeng Motor must pass if the two major automobile groups want to merge.
However, after the merger of the two major automobile groups, Dongfeng Motor Group’s shareholding ratio will drop to 9.14%, that is, Dongfeng Motor needs to sell 30.7 million shares to PSA, which also means that Dongfeng Motor can only make a profit of 380 million euro (about RMB 2.916 billion yuan) by selling shares at the current share price. If the previous share price is used, Dongfeng Motor will still get about 679 million euro (about people) The compensation of RMB 5.267 billion means that it is almost “cut back”. Therefore, Dongfeng Motor chooses not to reduce its shares, which will affect the merger plan of the two automobile groups.
Just as everyone thought Dongfeng might not choose to sell shares. The novel coronavirus epidemic has fallen by more than 50% due to the outbreak of the new coronavirus, Reuters reported on April 2nd. Dongfeng Motor is discussing with Citroen Peugeot the original plan to modify the Dongfeng stock reduction of Peugeot Citroen stock. The company has been discussing with Citroen.
However, on April 27, Dongfeng Group issued a notice, saying that the company had obtained the shareholder’s written approval for the merger of Peugeot Citroen Group and Fiat Chrysler on April 27, 2020. In accordance with rule 14.44 of the listing rules, the company decided to use the written approval of the shareholder instead of holding the on-site shareholders’ meeting to approve the DFG / dmhk commitment related to the merger of PSA and FCA; and the PSA share repurchase agreement.
Although Dongfeng Group’s share ratio in PSA has dropped to 9%, Dongfeng Group will still hold 4.5% of the shares of PSA + FCA group after the merger, which will still be the third largest shareholder. Meanwhile, it will reserve two seats on the board of supervisors and observers, including the vice chairman of the board of supervisors.
The reason why Dongfeng Group is still willing to reduce its holdings is that there are concerns about the performance of PSA group and domestic joint ventures. Due to the novel coronavirus pneumonia, the Hubei Shenlong Automobile has been one disaster after another. According to the data, PSA group only sold 35900 new cars in China and Southeast Asia in the first quarter, a year-on-year decline of 78.2%, becoming the market with the largest decline in all regions. In addition, the whole group will also show a 29% decline in 2019.
Although not affected by the epidemic situation, the cumulative sales volume of PSA group in China and Southeast Asia is only 1.17 million in 2019, with a year-on-year decrease of 55.4%. As a result, PSA suffered 700 million euro (about RMB 5.4 billion yuan) loss and write down in China. Therefore, rather than face continuous losses, it is better to use the money to develop its own brand after selling PSA group shares, according to you Zheng, deputy general manager of Dongfeng Motor Group.
Obviously, since the legal system brand has experienced a huge decline in the Chinese market in recent years, Dongfeng Motor’s holding of PSA group has not brought much profit. After all, the performance of PSA group in China in recent years is obvious. Not long ago, Renault, a subsidiary of Dongfeng Group, also chose to withdraw fuel vehicles from the Chinese market. It can be seen that the legal system model is still in a bad situation in China.