PSA Peugeot Citroen begin talks with Mitsubishi

[Yeo]

PSA Peugeot Citroen, the giant French automaker, said Thursday that it had started discussions on forming a "strategic partnership" with Mitsubishi Motors of Japan, which could result in it buying a stake.

http://www.nytimes.com/2009/12/04/business/global/04auto.html?dbk
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[Plex]

Good move by both companies should this deal works out. There are so much they can exchange from one another...

[Plex]

Peugeot-Citroen In Talks to Buy Mitsubishi, Good Idea?

Japan's Mitsubishi and France's Peugeot-Citroen are reportedly in the middle of talks that would result in something of a repeat of the largely successful Nissan-Renault alliance.

According to Business Week, a likely scenario is Peugeot buying a 53% stake in Mitsubishi, with Mitsubishi in turn buying an 18% stake in Peugeot, though Japan's Nikkei English News reports that only a 30-50% stake is being discussed. The former scenario would cost Peugeot $3.8 billion while the latter would top out at $3.5 billion.


If the deal goes through, Peugeot will become the third foreign owner of Mitsubishi after Chrysler and Mercedes-Benz, but there are numerous questions surrounding its viability. For starters, Mitsubishi is a bit player in almost every market of value that Peugeot wants to expand in or gain access to. There would be little gained by the French in India or China, and rumors of a Mitsubishi exit from North America have persisted for nearly half a decade. Mitsubishi's expertise in SUVs and electric cars would be far more valuable, but that could be gained by an expansion of the existing tie-up between the two automakers (the two have a joint factory in Russia plus Peugeot and Citroen sell rebadged versions of the Mitsubishi Outlander), saving Peugeot a considerable amount of money. The benefit for Mitsubishi would be access to a wider range of product, something that it badly needs. It has a small lineup and several of its models, such as the Galant, are badly in need of a redesign.

The biggest winners, according to Business Week, would be several Mitsubishi Group companies that collectively own about a third of the automaker. If Peugeot (or anyone else) buys Mitsubishi, the companies would not be expecting considerable dividends on the preference shares that they hold as a result of a 2005 bailout of the automaker. Estimated at around $230 million per year, these payments would further strip of much-needed cash and possibly push it towards bankruptcy -- and foregoing the payments could trigger a shareholder revolt. With a sale, they could trade in these preference shares, avoiding either outcome.


Motortrend

[VK-Sportsman]

Peugeobishi?
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Feel the Power of the

[Plex]

Name will not change...Its a platform sharing agreement they going for. Its like how VW owns Audi, Porsche etc. Name does not change.

[Plex]

Mitsubishi deal won't solve all Peugeot's problems

PARIS (Reuters) - A costly tie-up between PSA Peugeot Citroen (PEUP.PA) and Japan's Mitsubishi (7211.T) risks landing Europe's number-two carmaker with a partner too small to exploit Asia's booming markets.

Analysts want answers on financing for any deal and feel it could be a poor imitation of Renault-Nissan's 10-year alliance, often held up as a rare example of a successful sector tie-up.

The French carmaker, hit hard by the industry crisis and set on an ambitious drive to boost profitability, partly through upping its presence in fast-growing emerging markets like China, confirmed on Thursday that it was in talks to strengthen its existing relationship with Mitsubishi.

Peugeot wants to escape its European focus as sales in emerging markets explode and economic uncertainty and waning scrapping incentives crimp opportunities in its home region.

The deal is a step in the right direction, giving Peugeot access -- albeit on a tiny scale -- to key markets like China.

But analysts are not convinced it is the answer to all its problems and want detail on the deal's structure, management control, financing and most importantly the price before they pass judgment.

"Peugeot's issues aren't easy ones to fix -- it's not just a matter of a cost-cutting program here and there," said Credit Suisse analyst Stuart Pearson.

"It lacks scale and it's too Euro-centric. That can be painful and expensive to fix," he added, warning that "buying into Mitsubishi could be an expensive way to fix it."

In an industry burdened with overcapacity and crying out for consolidation, any M&A moves are seen as good news overall.

But for Peugeot, the world's eighth largest carmaker by 2008 sales volume, "it's kind of underwhelming," said Pearson, describing Mitsubishi as "a struggling sub-scale car company."

Mitsubishi sold 431,000 vehicles in the first half of the year, compared with 1.59 million for the Peugeot group, which incorporates the Peugeot and Citroen brands.

The alliance between PSA's smaller French rival Renault (RENA.PA) and Nissan Motor Co (7201.T) is much further advanced strategically.

Renault and Nissan are seeking to beef up their synergies and plan to lead the industry in the unproven electric car segment, in which Mitsubishi is among the few players to have a car on sale.

"Nissan is in a much better strategic and financial position than Mitsubishi," said Morgan Stanley analyst Adam Jonas. "Mitsubishi is a shadow of what Nissan is, or even what Nissan was, in terms of market position."

"Mitsubishi makes fewer than a million cars a year. It's a well-managed company but its market positions in every single market from Japan to the U.S. to Latin America, everywhere, are very, very weak," said Jonas.

Mitsubishi is ranked seventh out of Japan's eight carmakers, based on production for the first ten months of the year.


FINANCING FEARS

While analysts fear the deal may not deliver enough synergies and give Peugeot significantly greater market access, their most pressing concern is cash.

Business daily Nikkei reported the companies were in the final stages of negotiations, with Peugeot seeking a stake of 30-50 percent in Mitsubishi for upto 300 billion yen ($3.42 billion).

"Is this a targeted capital increase or is it a private placement and a cross-shareholding to the partners?" Morgan Stanley's Jonas asked.

Pearson added: "They have to be careful on the multiple they pay to Mitsubishi shareholders and how they're going to fund that."

CM-CIC analyst Guillaume Angue said in a note that Mitsubishi was expensive, with an enterprise value to sales ratio of 0.64 against 0.2 at Peugeot.

A divestment of Peugeot's stake in parts supplier Faurecia (EPED.PA) could contribute, along with a capital increase, if Peugeot did end up buying part of Mitsubishi as part of the deal, Credit Suisse's Pearson added.

"No one knows what's going to happen on the economy next year, let alone on scrapping incentives in this sector. You want to be very prudent and not to be gearing up now to buy assets that need a lot of work."

Reuters

[Plex]

Mitsubishi Motors, Peugeot In Capital Tie Talks

Mitsubishi Motors Corp. (7211.TO) and PSA Peugeot-Citroen (UG.FR) said Thursday they are in talks over a capital tie-up that could see the French auto maker take a significant stake in the Japanese company as an industry-wide slowdown and the need to invest in green car technology fuel consolidation pressures.

While Mitsubishi Motors said the tie-up was just one of a range of options it is discussing with Peugeot-Citroen, shares in Japan's sixth-biggest auto maker by sales surged as much as 23% during the day as investors relished the prospect of a deal that could help Mitsubishi Motors both develop electric vehicle technology and secure funds it may need to pay dividends for preferred shares.

"We have been talking about whether we can have a deeper relationship, and a capital tie-up is one among many options," said a Mitsubishi Motors spokesman, declining to comment on the scale or value of any potential deal.

PSA Peugeot Citroen later said separately that "it has started discussions with (Mitsubishi Motors) concerning the possibility of extending their relationship which could lead to a strategic partnership."

The Nikkei reported earlier Thursday that Peugeot-Citroen, Europe's second-biggest auto maker by sales, could buy a stake of 30% to 50% in Mitsubishi Motors for up to Y300 billion in a private placement of new shares, less than half of the French company's market capitalization of EUR5.76 billion, or about Y760 billion, based on its share closing price Wednesday.

Citing an executive close the matter, the paper also said the Mitsubishi group would be open to Peugeot Citroen taking a majority stake in Mitsubishi Motors.

Analysts say the potential capital alliance would allow Peugeot-Citroen to save time in obtaining future key green technologies by using the Japanese firm's well-developed systems for electric cars. It could also make a foray into the U.S. and some growing Asian markets through Mitsubishi's sales networks in those regions.

For Mitsubishi Motors, the potential deal would help it overcome a major challenge. The company is obliged to pay a dividend worth Y20 billion at the end of March for preferred shares that it began issuing five years ago to Mitsubishi Heavy Industries Ltd., Mitsubishi Corp., Bank of Tokyo-Mitsubishi UFJ and other Mitsubishi group firms as part of its previous restructuring plan.

The Japanese car maker would also be able to share the hefty cost of developing advanced electric cars with Peugeot and to reduce the production costs of these vehicles by supplying them to Peugeot.

The talks between the two firms could raise expectations that more deals might be coming, following speculation earlier this year that Suzuki Motor Corp. was in talks with Volkswagen AG over a possible tie-up.

The two auto makers have already struck partnership deals that include Mitsubishi supplying its i-MiEV electric city car and its Outlander sports utility vehicle to Peugeot-Citroen. They also plan to jointly produce SUVs in Russia.

The talks come as global auto makers, only now showing signs of limping out of a bruising slowdown brought on by the economic slowdown, are shifting their marketing focus to emerging markets and ramping up investments to develop fuel-efficient, low-emission cars to meet stricter emission regulations by using the latest technology.

However, entering these markets and developing these technologies is proving to be a costly challenge for auto makers as they struggle with losses and sharp drops in profits.

Peugeot-Citroen reported an operating loss of EUR826 million in the first half. It recently raised its full-year guidance. Still, the company only expects to break even on an operating basis for the full year.

Mitsubishi Motors suffered an operating loss of Y2.9 billion in the July-September quarter. While it expects an operating profit of Y30 billion for the full fiscal year through March, analysts warn it will be hard to meet this projection due to the yen's recent surge to a 14-year high against the dollar. A stronger yen slashes profits earned abroad when translated into yen and makes vehicles built in Japan more expensive overseas.

Like many of its peers, the French company already has a range of targeted industrial partnerships with auto producers in various parts of the world. But the projected tie with Mitsubishi Motors could echo the long-standing links with France's Renault SA and Nissan Motor Co. Renault controls Nissan with a 44% stake, while the Japanese company owns 15% of its partner, and Carlos Ghosn is the senior executive at both companies.

Analysts say Renault's aggressive push to introduce electric cars with Nissan may be a catalyst prompting Peugeot to look to forge a wider partnership with Mitsubishi Motors, which became the world's first mass-producer of electric cars this year.

Renault and Nissan together plan to launch electric cars over the next few years worldwide to take an early lead in the fledgling electric car market by making their vehicles more affordable.

"Peugeot is watching Renault ... If more hybrids and electric cars are coming in Peugeot won't be able to compete enough with only diesel-powered models," Koji Endo, independent research firm Advanced Research Japan, said.

Peugeot-Citron's Chief Executive Philippe Varin indicated recently that the French company's controlling Peugeot family are being more open-minded about an alliance with another automotive group, provided that it creates value for Peugeot-Citroen shareholders and doesn't impinge on its independence. Any deal would also need the backing of group companies Mitsubishi Corp. and Mitsubishi Heavy Industries which have respective stakes of 14% and 15.6% in the Japanese auto maker.

On the Tokyo Stock Exchange, shares of Mitsubishi Motors ended up 13% at Y135 after a lengthy trading suspension earlier in the day pending comment from the company. At the closing price, the company's market capitalization was just Y748 billion.

News of the talks lifted other car makers. Toyota Motor Corp.'s (7203.TO) shares soared 5.6% to Y3,760 and Mazda Motor Corp. (7261.TO) jumped 6.7% to Y207.

After opening up 2.9%, Peugeot shares lost steam in early trading Thursday. Even if the new alliance benefits the French car maker, it won't "bring game-changing scale, nor industry-leading technology," given the Japanese car maker's relatively small sales volume of about 1.0 million vehicles a year compared with about 3 million vehicles at Peugeot, Credit Suisse wrote in a report.

WallStreetjournal

[Plex]

Peugeot, Mitsubishi Said to Meet on Stake Swap Negotiations

Jan. 15 (Bloomberg) -- PSA Peugeot Citroen and Mitsubishi Motors Corp.’s managers met this week in Tokyo to negotiate a deal that would give the French carmaker a controlling stake in the Japanese company, two people familiar with the matter said.

A transaction would involve a share swap, said the people, who asked not to be identified because the talks are confidential. At least four scenarios are being discussed, one of the people said. One proposal has centered around Peugeot taking 51 percent of Mitsubishi in exchange for $1.8 billion in cash and 18 percent of Peugeot, although that plan didn’t win support, the people said.

Peugeot and Mitsubishi said on Dec. 3 that they were in talks on the French company’s possible purchase of a holding in addition to developing more technology together. A stake acquisition would reverse Peugeot’s strategy of restricting tie- ups to manufacturing alliances. Its partnerships with Tokyo- based Mitsubishi include a Russian joint venture and pooled production of four-wheel-drive and electric vehicles.

The French carmaker is seeking a closer partnership abroad as rivals increase their presence in Asia. Volkswagen AG, Europe’s biggest carmaker, completed the purchase of 19.9 percent of Suzuki Motor Corp. French rival Renault SA has been integrating more tightly with Nissan Motor Co., its 44 percent- owned affiliate.

Hugues Dufour, a Peugeot spokesman, said a management delegation met Mitsubishi representatives in Tokyo this week as part of the two companies’ regular exchanges on existing cooperation agreements. He declined to say whether there were also further tie-up discussions during the visit.

Net Debt

Kazuhiro Yamana, a Mitsubishi spokesman, said he couldn’t confirm the meeting and called a share swap transaction between the carmakers “speculation.”

The companies may give an update in the second week of February when Paris-based Peugeot is scheduled to release earnings, the people said.

Acquiring a stake may stretch finances at Peugeot, Europe’s second-largest automaker, which had 2 billion euros ($2.9 billion) in net industrial debt as of June 30 and bonds rated below investment grade by Standard & Poor’s. Peugeot has a market value of $9 billion, compared with $8.8 billion for Mitsubishi. Still, the French carmaker sells three times as many vehicles and generates four times as much revenue.

Renault and Yokohama, Japan-based Nissan are investing jointly in an auto factory in India, where the company is forecasting the car market, Asia’s fourth-biggest, will triple in 10 years. Volkswagen’s stake in Hamamatsu, Japan-based Suzuki gives it a tie to the partner’s Maruti Suzuki India Ltd. division, which accounts for about half the cars sold in India.

Businessweek

[Plex]

Peugeot-Citroen Says Mitsubishi Talks Are Continuing

PARIS (Dow Jones)--Talks between PSA Peugeot-Citroen (UG.FR) and its Japanese partner Mitsubishi Motors Corp. (7211.TO) on deepening their alliance are continuing, a spokesman for the French auto maker said Tuesday.

"We are still in exploratory discussions, and we have nothing more to add at this point beyond what we said in December," the Peugeot-Citroen official told Dow Jones Newswires.

The official was commenting on reports in the French press on the talks. One report, in the financial daily Les Echos, said the discussions "are nearly stalled," and said the main hurdle is the valuation of the two companies.

Meanwhile, an article in La Tribune, another French financial daily, said the talks between the two car manufacturers are accelerating.

Early last month, after a leak in the Japanese press, Peugeot-Citroen was obliged to issue a statement confirming it had started discussions with Mitsubishi "concerning the possibility of extending their relationship, which could lead to a strategic partnership."

The Peugeot-Citroen official said the discussions with its Japanese partner could take months to reach a conclusion. "Inevitably, there will be rumors about how the talks are progressing," he said, adding that there is no deadline for the negotiations to be concluded.

Mitsubishi officials in Tokyo also confirmed that the talks with Peugeot-Citroen are continuing.

At present, Peugeot-Citroen buys electric and sports-utility vehicles from Mitsubishi and brands them as it own for sale in Europe. The two companies also will soon start manufacturing vehicles at an assembly plant in Russia, and are looking at other ways--both industrial and geographical--to expand their alliance.

The article in Les Echos says the Peugeot family that owns a 30% blocking minority in Peugeot-Citroen is keen to take operational control of Mitsubishi, but isn't prepared to see its influence in its company diminish. It adds that the family considers that Mitsubishi is overvalued by the market while Peugeot-Citroen is undervalued.

Still, Peugeot-Citroen would prefer to cement its relationship with Mitsubishi through an exchange of shares rather than dipping into cash.

Peugeot-Citroen Chief Executive Philippe Varin, in an interview published over the weekend in Investir, a weekly financial paper, indicated that Peugeot-Citroen is talking to other potential partners. While Mitsubishi "is a good candidate" for deeper cooperation, he said, "there can be others, even if the list isn't very long."

He also voiced the possibility that the talks with Mitsubishi might not go anywhere. "If there is no agreement, Peugeot will continue to live and develop."

Online.WSJ

[Plex]

Mitsubishi: may supply 'global car' to Peugeot

Mitsubishi and PSA said in December they had begun talks to form a strategic partnership to build on their existing project-based ties such as SUVs and electric cars. Mitsubishi has said this partnership could include capital ties.

Mitsubishi is planning to introduce a new model called "global small car" in 2011 with a price tag of 1 million yen ($11,150) or less -- part of a broader strategy to focus on more fuel-efficient vehicles.

The Asahi newspaper reported that Mitsubishi planned to sound out PSA Peugeot about supplying it with the car, citing an interview with Mitsubishi president Osamu Masuko.

Mitsubishi Motors spokesman Tetsuji Inoue said Peugeot could be among the carmakers it would consider for such a supply deal but nothing had been decided. ($1=89.70 Yen

Reuters

[Plex]

UPDATE 2-Mitsubishi, Peugeot rule out capital tie-up

Both chiefs confirm intention to expand business tie-up

* Negative for M'bishi, loss of way to raise funds - analyst

* Finance and value conditions were not met - PSA chief (Adds PSA CEO and analyst comments, background)

TOKYO/GENEVA March 3 (Reuters) - Japan's Mitsubishi Motors Corp (7211.T) and France's PSA Peugeot Citroen (PEUP.PA) said they have decided against forming a capital alliance but would continue talking towards expanded business ties.

The two car makers had announced in December the start of talks to form a strategic partnership to build on existing project-based ties such as SUVs and electric cars, and Mitsubishi said a capital alliance could be part of that deal.

PSA was eyeing a 30-50 percent stake in Mitsubishi for up to 300 billion yen ($3.4 billion), a deal that would give the struggling Japanese automaker a much-needed infusion of capital, the Nikkei newspaper reported at the time.

Mitsubishi and PSA said in a joint statement on Wednesday that President Osamu Masuko and PSA Chief Executive Philippe Varin met at the Geneva motor show and confirmed their intention to expand operational ties but concluded that a capital alliance would not be realistic.

"There were conditions in terms of finance and value, etc. We met last night, we talked about it and we decided the conditions were not met," PSA Chief Executive Philippe Varin told Reuters on the sidelines of the Geneva auto show.

Mitsubishi needs a strategic partner to survive, while PSA wants global scale to become less reliant on stagnating European markets, where government subsidies are running out.

That Franco-Japanese alliance is also looking to lead the industry in the unproven electric car segment, where Mitsubishi Motors is among the only players to have such a car on sale.

"Although Mitsubishi has good technologies, it is negative news for the company to have lost a way to raise money," said Shigeo Sugawara, senior investment manager at Sompo Japan Asset Management.

Shares of Mitsubishi closed up 0.8 percent at 132 yen in Tokyo ahead of the announcement, outperforming a 0.3 percent rise in the benchmark Nikkei average .N225.

Reuters

[Plex]

Mitsubishi Motors and Peugeot Deepen Ties

PARIS—Japan's Mitsubishi Motors Corp. and France's PSA PSA Peugeot Citroën Tuesday announced they are deepening their industrial ties by allowing the French car maker to use Mitsubishi underpinnings for a new vehicle, but once again stopped short of an alliance involving shareholdings.

The latest project, the fourth between the two car makers, will allow Peugeot-Citroen to add a compact sport-utility vehicle to its lineup and carve itself a slice of this fast-growing market niche, which the two companies expect to grow by almost 60% globally by 2105.

"The compact SUV market is undoubtedly the hot space to be in" for European manufacturers, said Michael Tyndall, industry analyst at Nomura. "People want the high seating position of the SUV that gives a feeling of security, but they don't like the bulk and perceived fuel inefficiency of full-sized SUVs."

Nissan Motor Co., Fiat SpA and Honda Motor Co. have already entered the market for compact SUVs.

The plan is for Peugeot-Citroen to make two visually different vehicles for its Citroen and Peugeot brands using the underpinnings of Mitsubishi's RVR, a compact SUV that went on sale in Japan earlier this year and will be marketed in Europe as the ASX.

The latest accord resembles two earlier agreements between the two companies.

Peugeot-Citroën already makes larger SUVs based on Mitsubishi's Outlander, and it will start selling mini electric vehicles in Europe based on Mitsubishi's i-MIEV. The two companies also have a joint assembly plant in Russia making SUVs and sedans that was inaugurated last week.

Peugeot-Citroën believes it can sell 50,000 of the new vehicles annually in Europe after launch in 2012. The French company will re-engine the Mitsubishi vehicles with its own 1.6-liter diesel engine, and the SUVs will be available in two- and four-wheel-drive versions.

The benefits for Peugeot-Citroën from buying Mitsubishi platforms are much lower development costs than building a vehicle from scratch, as well as reduced time to market. It also gets a fresh product without investing in new capacity.

For Mitsubishi, bigger volume production translates into economies of scale and better capacity utilization.

The latest project should be fairly painless to integrate, as the two companies already have experience in working with each other in supply chains and engineering departments.

Some analysts are dubious about such industrial alliances, however. Although there are undoubted cost gains for both sides, they say, these arrangements add a layer of complexity to a project.

However, the two companies still are shying away from a deeper alliance involving cross-shareholdings to cement their relationship. Peugeot-Citroën and Mitsubishi had explored the idea of such an alliance, but in March they acknowledged that the financial conditions weren't right.

That was a relief to some financial analysts who had feared that Peugeot-Citroën would overpay for a stake in an overvalued Mitsubishi. The Japanese company announced earlier Tuesday that it had returned to profitability in the three months ended March 31, and predicted that its net profit will triple in the current fiscal year.

WSJ