Peugeot may buy large stake in Mitsubishi

Peugeot may buy large stake in Mitsubishi

Tokyo: French car maker PSA Peugeot Citroen could buy a large stake in Japanese peer Mitsubishi Motors Corp. as part of a plan to deepen ties to ride out the industry’s worst ever slump.

The companies said on Thursday they were in talks to strengthen an existing relationship, which would create a leader in electric vehicles, with Mitsubishi, whose shares rose 13.4%, saying a capital tie-up was possible.

A spokesman for Peugeot, ranked eighth in the world by 2008 sales volume, would not comment on how long talks could last.

Peugeot will face increased competitive pressure from domestic rival Renault SA which is looking to beef up its synergies with 10-year equity partner Nissan Motor.

That Franco-Japanese alliance is 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.

Peugeot’s interest in Mitsubishi Motors, ranked seventh of Japan’s eight car makers by January-October production, is in line with the recent push by new chief executive Philippe Varin to create a more global car company.

Varin, who took on the role in June, has said this could be achieved by various means, including alliances with car makers.

Mitsubishi Motors shares closed 13.4% higher after the Nikkei business daily reported Peugeot, Europe’s second biggest car maker, may take a 30-50% stake for up to 300 billion yen ($3.4 billion).

Peugeot shares were up 0.4% by 10.40 GMT.

Nikkei said top management at Mitsubishi were ready to accept a majority acquisition of the company by Peugeot if conditions were right.

CM-CIC analyst Guillaume Angue said in a note the alliance would make sense from an industrial viewpoint and it would allow Peugeot to solve its problems of size, but it would come a bit early in the business cycle.

Morgan Stanley analyst Adam Jonas said in a note there were “no significant areas of near-term savings," adding that “cultural/integration risks are extremely high", while the negotiation process, especially regarding financing, could take up to several months.

Nikkei said the two car makers were in the final stages of negotiations, with Peugeot seeking a stake of more than 50% in Mitsubishi through the placement of new shares.

Mitsubishi may also potentially buy an interest in Peugeot, the paper said.