Dongfeng to Invest €800 Million in PSA

China's Dongfeng Motor Group Co. has agreed to pay €800 million to acquire a 14% stake in PSA Peugeot Citroen.

The French government is expected to make a similar investment, also gaining a 14% share. The two investments will dilute the Peugeot family's 25.5% stake in PSA to 14%.

A regulatory filing by Dongfeng says PSA also intends to distribute warrants to existing shareholder such that every 10 warrants can be converted to three PSA shares at €7.50 each.

The companies aim to use the deal to expand their existing partnership in China, which produces cars there in three factories. The partners hope to sell a combined 1.5 million vehicles per year in China by 2020, according to Dongfeng's regulatory filing. The filing says the cars will be sold under the Citroen, Dongfeng and Peugeot brands and could eventually be exported to other markets in Asia Pacific.