LONDON (Reuters) - The board of French carmaker PSA Peugeot Citroen (>> PEUGEOT) has approved in principle a 3.5 billion euro capital increase involving China's Dongfeng Motor Group (>> Dongfeng Motor Group Co. Ltd) and the French state, a source familiar with the situation said on Wednesday.

The proposed deal, which has not yet been finalised, involves a rights issue and a reserved capital increase which would be priced at below 7 euros per share, the source said, adding it was approved at a special Peugeot board meeting held on Tuesday.

Under the terms of the proposal, Dongfeng and the French state would each end up holding around 20 percent of Peugeot and the Peugeot family around 15 percent, the source said.

Peugeot, which declined to comment, aims to finalise the capital increase in January or February of 2014. Dongfeng could not immediately be reached for comment.

(Reporting by Sophie Sassard; Editing by Alexander Smith)

Stocks treated in this article : PEUGEOT, Dongfeng Motor Group Co. Ltd
Valeurs citées dans l'article : PEUGEOT, Dongfeng Motor Group Co. Ltd