Dongfeng in drive to acquire big Peugeot Citroen stake

Nicolas Zhu, a partner at CMS, China, was interviewed by China Business Law Journal to comment on Dongfeng and Citroen deal.

China’s Dongfeng Motors has proposed equity investment, together with the French government, in PSA Peugeot Citroen Group in a deal that offers the French car maker opportunities in China, but things may not be so easy, says one legal expert.

“I think that China’s auto market still has a long way to go. Traditional cars makers will encounter more difficulties due to the energy and environment protection problems,” Nicolas Zhu, a partner at CMS, China in Shanghai, told China Business Law Journal.

“To develop new energy cars is the trend for development in this industry. New technologies will be the key to success in this area.”

Dongfeng and the French government will each invest about €800 million in the deal, which is subject to shareholder approval. If the acquisition is approved, the Peugeot family will lose its control of PSA.

After closing, the structure of deal will reportedly leave PSA with three equal partners – Dongfeng, the French government and the Peugeot family, each holding a 14% stake in PSA.

As Zhu understands, through this transaction Dongfeng mainly aims to develop its business in the international market and expand its brand reputation, while strengthening its co-operation with PSA, both in China and worldwide.

“Dongfeng has developed in the past through co-operation of various international car makers, and most of them are cobranding. How to develop the brand value of Dongfeng not only in China but also on the international market will be essential for its further development,” Zhu said.

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