Dongfeng might sell its USD2.5 billion shares in PSA Group

Dongfeng Motor is exploring options for its USD2.5 billion stake in PSA Group including a potential divestment, people with knowledge of the matter said, as the companies grapple with a global slowdown in the auto market.

The Chinese state-owned automaker held talks in recent weeks with potential advisers about ways to monetize part or all of its 12.2 percent stake in the French automaker, according to the people.

As part of the strategic review, Dongfeng has discussed possible transactions including a straight sale of PSA shares or issuing exchangeable bonds backed by PSA stock, the people said.

The funds would allow Dongfeng to invest in other areas at a time when its rivals are spending billions on electric vehicles and autonomous driving systems.

The global car market is deteriorating as shifts in technology and weakening economic growth give consumers fewer reasons to go to the showroom. The slump has prompted traditional automakers to fight back by slashing jobs and pursuing mergers.

Dongfeng, which has a Chinese joint venture with PSA, plans to coordinate with the French company if it decides to sell down so that it can preserve a good working relationship, they said. Deliberations are at an early stage, and there is no certainty they will lead to a deal, according to the people.

The Chinese automaker may hold onto part of its stake in PSA to potentially benefit from future industry consolidation, the people said. PSA said in May that it is open to “any opportunities” to create long-term value amid reports of tie-ups with other automakers.

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