UPDATE: PSA Confirms Talks on €3 Billion Capital Deal

PSA Peugeot Citroen confirms it is in talks with Dongfeng Motor Corp. about a €3 billion capital increase that includes matching equity stakes for the Chinese carmaker and the French government.

Earlier media reports say the plan would the government and Dongfeng each contributing at least €750 million for 14% equity in PSA. The French company also would hold a rights issue to raise an additional €1.4 billion.

PSA says it is negotiating with Dongfeng about taking an unspecified stake in two steps: funding through a reserved sale followed by participation in a rights offering.

The French company confirms that the government also may participate in the two capital increases on the same terms. Existing shareholders would be given the right to buy shares at the same price.

Earlier reports said the Peugeot family, which has controlled the company for more than 100 years, would invest €100 million to maintain a 14% stake. The family, which currently owns 25.5% of PSA, reportedly remain divided about whether to accept the plan.

PSA says is analyzing "other alternative" capital increase scenarios but hopes to make a definitive announcement by Feb. 19, the day it will report 2013 year-end results.