UPDATE 1-Fiat and Peugeot dismiss latest tie-up report

Thu Jul 24, 2014 12:11pm EDT

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MILAN/LONDON, July 24 (Reuters) - PSA Peugeot Citroen and Fiat Chrysler denied a Financial Times report on Thursday that the companies were preparing a merger to create the world's fifth-largest carmaker.

"PSA categorically denies every aspect of the FT report on a merger with Fiat," a spokesman for the French carmaker said. Fiat Chrysler said that no such discussions were underway.

Shares in both carmakers rose after the newspaper said that merger talks had been held earlier this year, prior to Peugeot's stake sale to China's Dongfeng Motor Group, and were poised to resume.

The anonymously sourced report appeared a week after Fiat and Volkswagen denied a story in Germany's Manager Magazin suggesting they were in takeover talks.

Fiat has yet to execute its complex merger with Chrysler after successfully completing its buyout of the U.S. automaker at the start of 2014.

Peugeot is using the proceeds of its 3 billion euro ($4.1 billion) share sale, in which the French state and Dongfeng acquired matching 14 percent stakes, to expand overseas and cut costs in a bid to halt years of losses.

"The group has set out a strategic plan ... and that exercise will be our focus for the next two to three years," the Peugeot spokesman said.

"After that we will see whether further developments need to be considered." ($1 = 0.7425 Euros) (Reporting by Agnieszka Flak in Milan, Laurence Frost and Gilles Guillaume in Paris and Francesco Canepa in London; Editing by Lionel Laurent and Jane Merriman)

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