UPDATE 2-China's Dongfeng says held talks with Peugeot but no deal reached

Mon Feb 10, 2014 8:29am EST

(Recasts with Dongfeng statement)

SHANGHAI Feb 10 (Reuters) - China's Dongfeng Motor Group Co Ltd confirmed on Monday it had held talks with PSA Peugeot Citroen about a potential investment in the French carmaker, but said no agreement had yet been reached between the two groups.

Earlier Dongfeng had asked for a halt on trading in its shares pending an announcement concerning unspecified "inside information", but gave no further detail.

The share trading halt came after sources in France told Reuters on Friday that Peugeot negotiators and French government officials would be in China this week, for what they hoped will be a final round of negotiations on the tie-up with the China's second-biggest automaker.

The sources said the proposed deal would involve the Chinese carmaker and French government taking matching stakes in the Paris-based company through a 3 billion euro ($4.1 billion) share issue.

The final push for an agreement, due to be presented to the Peugeot board on Feb. 18, follows public discord among members of the founding Peugeot family and protests from minority shareholders over the planned share issue.

It was not immediately clear whether the final agreement, if reached, would be between Peugeot and Dongfeng or its unlisted, state-owned parent, Dongfeng Motor Corp.

Crippled by Europe's six-year market slump, Peugeot has said it needs fresh funding to survive in the medium term. The company's financing arm is already being kept afloat by a 7 billion euro loan guarantee from the French state.

Zhang Yuguang, a China-based spokesman for Peugeot, said he was not aware of a trip to China by company negotiators. ($1 = 0.7343 euros) (Reporting by Kazunori Takada and Samuel Shen; Editing by Miral Fahmy and David Holmes)

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