Dongfeng Motor, a China state-backed group, is buying a 14% stake in troubled French automaker PSA Peugeot Citroen for 800 million $1.1 billion in a bold, if risky, move.
Peugeot, the second largest European automaker, has been racking up losses in recent years and is in need of cash, with analysts only expecting the group to turn around in the financial year 2015.
However, based on the company's projected earnings at that time, the valuation of the deal looks reasonable.
“It has been priced at 4.5 times Peugeot's financial year 2015 consensus earnings,” said Eva Yip, an analyst at Sun Hung Kai Securities. “Overall,...