China's Dongfeng shares suspended; Peugeot tie-up talks reported to be in final stage

SHANGHAI Sun Feb 9, 2014 11:21pm EST

SHANGHAI Feb 10 (Reuters) - China's Dongfeng Motor Group Co Ltd, currently in talks to buy a stake in PSA Peugeot Citroen, asked on Monday for a trading halt pending an announcement concerning "inside information".

Dongfeng, which already has a joint venture with Peugeot in China, did not give further details and company spokesman Zhou Mi said he was not aware of the reason behind the suspension.

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

The sources said the proposed deal that would see the Chinese carmaker and French government take matching stakes in the Paris-based company through a 3 billion euro ($4.09 billion) share issue.

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

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

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, 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)

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