Dongfeng to reduce PSA stake in merger deal with Fiat: sources

FILE PHOTO: The logo of Dongfeng Motor Corp is pictured at the Auto China 2016 auto show in Beijing, China, April 26, 2016. REUTERS/Kim Kyung-Hoon

MILAN (Reuters) - China's Dongfeng Motor 0489.HK will have a reduced stake of around 4.5% in the new group resulting from the merger between Peugeot owner PSA PEUP.PA and rival Fiat Chrysler FCHA.MI, two sources said on Tuesday.

Earlier the board of PSA approved a binding memorandum of understanding for a $50 billion tie-up between the two groups.

Dongfeng has a 12.2% equity stake in PSA and under a preliminary agreement announced in October would have had about half of that in the combined entity with FCA.

Dongfeng did not response to requests for comment. The company halted trading of its shares on Wednesday.

According to the binding deal approved by PSA board on Tuesday, FCA’s robot unit Comau will remain within the combined group rather than being spun off as was originally planned in October, the sources said.

The two groups will then jointly decided how to extract value from Comau.

Reporting by Gianluca Semeraro, writing by Giulio Piovaccari, Additional Reporting by Yilei Sun in Beijing; editing by Silvia Aloisi