The planned €1bn capital-raising by the French company is being done via a
deeply discounted rights issue. That may suggest some underwriting caution.
Shareholders, however, should theoretically be agnostic on the size of the
discount and – at 32 per cent to the theoretical ex-rights price – it is in
line with other significant capital raisings done in the French market since
2008. GM, meanwhile, will pay just over €300m for its 7 per cent stake in
Peugeot, largely by acquiring some of the Peugeot family’s rights.
Taking things slowly
A separate GM filing, meanwhile, suggests that the two companies have at least
four joint products in view, aside from the core joint purchasing plan, with
its modest goal of $2bn in savings on a $125bn combined budget. All of which
leaves investors to puzzle over whether this is a prudent start to something
big, or a disappointingly unambitious response to industry conditions.
Corporate history is littered with automaker alliances that promised too much
and delivered too little. And there have also been plenty where commercial
co-operation has foundered because of ownership issues – GM/Fiat or the
current friction between Suzuki and Volkswagen. So the companies may lose
little by taking things slowly.
Financial stability
More fundamentally, though, the arrangement has helped Peugeot establish some
financial stability. The Peugeot family’s willingness to accept modest
dilution may also be positive, although in retaining almost 38 per cent of
the voting rights it has given up little.
But the risks are the time it will take for synergies to flow and, above all,
uncertainty over whether the alliance will ultimately help in reducing
European overcapacity.
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