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China's Dongfeng and Peugeot to agree on capital tie-up: source

A Peugeot company logo is seen outside an automobile dealership in Paris December 13, 2013. REUTERS/Charles Platiau

SHANGHAI (Reuters) - China's Dongfeng Motor Group Co Ltd <0489.HK> and PSA Peugeot Citroen (UG.PA) will sign a memorandum of understanding on a capital tie-up between the two carmakers later on Tuesday, a Dongfeng source told Reuters.

The source said the non-binding agreement would involve Dongfeng and the French government each injecting 800 million euros ($1.10 billion) for 14 percent stakes in the French carmaker.

The fundraising by PSA would total 3 billion euros after selling new shares to existing shareholders, said the source, who declined to be identified because the information is not yet public.

($1 = 0.7298 euros)

(Reporting by Samuel Shen and Kazunori Takada; Editing by Paul Tait)