Algeria discussing Peugeot stake -source

PARIS Wed Dec 12, 2012 5:50am EST

PARIS Dec 12 (Reuters) - The Algerian government is likely to discuss a possible investment in PSA Peugeot Citroen with French officials, a diplomatic source said on Wednesday.

A potential Algerian investment in the struggling French automaker may be raised during President Francois Hollande's visit to Algiers next week, the source said, confirming a report on La Tribune's website.

He declined to be identified because the discussions were confidential.

"We are not commenting on this latest rumour," Peugeot spokesman Pierre-Olivier Salmon said.

An Algerian deal with Peugeot, which is cutting more than 10,000 domestic jobs and closing a plant to stem losses, could impact rival Renault's plans for a factory in the country, the French weekly also reported on Wednesday.

Peugeot shares, which had risen earlier in the day after the company announced an additional 1,500 job cuts for 2013-14, advanced further on the Algeria report and were up 6.5 percent at 5.25 euros as of 1035 GMT.

Renault's framework deal with Algeria, yet to be finalized, provides for construction of a plant to serve the local market, which expanded 46.5 percent in the first half to a total of 225,000 vehicles.

"We're still in discussion and the dossier is making progress," a Renault spokeswoman said, declining to comment on the reported talks over Peugeot.

"We're still waiting to sign the final agreement in the framework of the memorandum we concluded in May," she said.

(Reporting by Laurence Frost; Editing by Christian Plumb)

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