Dongfeng Motor buys 14 pct stake in PSA

China's Dongfeng Motor Group Co., Ltd. on Wednesday announced it has signed an agreement to buy a 14 percent stake in PSA Peugeot Citroen.

The deal, if approved, would become the latest major overseas investment made by a Chinese carmaker, following SAIC Motor and Geely.

According to a memorandum of understanding signed on Tuesday, the state-owned Chinese automaker headquartered in the central city of Wuhan and the French government will each invest 800 million euros (1.1 billion U.S. dollars) in the struggling French carmaker.

The share sale is subject to regulatory approvals in China and France.

PSA Peugeot Citroen will also raise a further 1.4 billion euros from other investors, including the Peugeot family.

Should the share sale be approved, the Peugeot family's current 25.4 percent stake will be diluted to 14 percent, equivalent to shares held by Dongfeng Motor and the French government.

Thierry Peugeot, chairman of PSA Peugeot Citroen, said the share sale will help boost the carmaker's financial conditions and growth.

Dongfeng Motor and PSA Peugeot Citroen also agreed to strengthen cooperation in technology, research and development (R&D), manufacturing and overseas distribution.

The two plan to set up a R&D center in China and form a subsidiary responsible for sales of PSA and their joint venture Dongfeng Peugeot Citroen Automobile Co,. Ltd. in Asia, particularly Southeast Asia.

The two have targeted annual sales of 1.5 million vehicles for Dongfeng Peugeot Citroen Automobile Co,. Ltd. in 2020, more than double the sales figure last year.

Also on Wednesday, PSA Peugeot Citroen released its 2013 results. It posted a loss of 2.32 billion euros last year, following a loss of 5.01 billion euros in 2012.

The carmaker launched share sale talks with Dongfeng Motor and the French government after a restructuring plan announced in mid-2012 failed to avert its losses.