China's Dongfeng Motor and PSA Peugeot Citroen will agree on Tuesday to a capital tie-up as part of a broader 3 billion euro fundraising that will end the Peugeot family's control of the 200-year-old French carmaker, a source said.
A non-binding memorandum of understanding will be signed whereby China's second-biggest carmaker and the French government each will inject 800 million euros ($1.10 billion) for 14 percent stakes in PSA Peugeot, a Dongfeng executive with direct knowledge of the talks told Reuters.
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Peugeot will also sell new shares to existing shareholders, bringing the total fundraising effort to 3 billion euros ($4.1 billion), the source said, confirming earlier Reuters' reports. The source declined to be identified because the information was not yet public.
The rescue deal will help Peugeot - founded in 1810 as a maker of tools and coffee grinders - survive the withdrawal next year of 7 billion euros in state guarantees to its sales financing arm, which are keeping the French firm afloat.
The company that beat Ford by 22 years to make the first series-manufactured car back in 1891, survived two world wars and become a champion of French industry is struggling to contain losses that burnt 3 billion euros of cash in 2012.