Peugeot reportedly in talks with GM, but will the family dilute its stake?

French carmaker Peugeot Citroen is reportedly planning to raise around €1 billion through a share rights issue, but whether this would dilute the Peugeot family’s stake in the business is not yet known.

According to reports by the financial media, General Motors, which is the world’s largest automobile-maker, will buy a 7% stake in Peugeot as part of the share sale.

This stake would reportedly be worth around €250 million based on the group’s market capitalisation of about €3.5 billion. But more money is expected to be raised through a rights issue, involving the sale of shares to other existing investors.

When contacted by CampdenFB, a spokeswoman for Peugeot refused to comment on media “rumours”.

The founding Peugeot family, which owns 30.9% of the carmaker and holds 48% of the voting rights, will also participate in the share sale, said media reports, quoting people familiar with the matter.

But whether this would affect their control of the family business is unclear – the spokeswoman was unwilling to confirm the family’s involvement in the sale of stake.

Speculation about a possible alliance between Peugeot and GM first began last week, after both the French family-controlled carmaker, headed by chairman Thierry Peugeot, and GM saw 2011 sales in Europe take a hit, falling by 8.8% and 1.9% respectively.

On 21 February, Peugeot said in a statement that it was looking at “potential cooperations and alliances” to improve its “operational performance”, but did not reveal any other information.

If Peugeot goes ahead with the share sale, analysts reckon it will help the Paris-based company shore up its finances and consolidate its presence in Europe – it is currently the second-largest car manufacturer in the continent after fellow family-controlled Volkswagen.

Peugeot, which had revenues of €59.9 billion last year, traces its roots back to the early 19th century to a small business producing tricycles and bicycles.

Today, Thierry works alongside Jean-Philippe Peugeot, who is vice-chairman of the company. Other family members on the board include Roland and Robert Peugeot and Marie-Helene Roncoroni.