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By Sophie Sassard
LONDON, Oct 18 (Reuters) - Peugeot's talks on a 3 billioneuro ($4.11 billion) French-backed tie-up with Dongfeng areprogressing more slowly than the troubled carmaker had hoped,sources with knowledge of the matter said after negotiatorsreturned from meetings in China.
The French carmaker now hopes to sign a non-binding outlinedeal with its Chinese partner in late November at the earliest,a month later than it was expecting as recently as last week,the sources said. A deal could then be inked early next year.
A Peugeot spokesman said the company had nothing to add toearlier comments on the talks. It has confirmed it is seeking adeeper tie-up with existing partner Dongfeng or anothercarmaker.
PSA Peugeot Citroen is hoping to raise as much as 3 billioneuros in a capital increase in which the French state andDongfeng would each take a 20-30 percent stake, Reuters firstreported last week.
Peugeot executives, officials from France's APE, the agencyin charge of government holdings, were part of a delegation thatattended key meetings with Dongfeng in Beijing on Saturday andWednesday, the sources said.
The talks were not as productive as expected becauseDongfeng is not in a hurry to invest in Peugeot and is playinghard ball on price, the sources said.
PLAN B
Peugeot is meanwhile pushing ahead with efforts begun in Mayto sell off part of its Banque PSA car loans division, said fourpeople familiar with the talks.
Europe's biggest car financing player Santander is reviewinga bid to acquire 50 percent of Banque PSA, which is worth about3 billion euros, the sources said.
Other contenders are interested in operations in specificcountries. UniCredit and Commerzbank couldbe interested in acquiring Banque PSA's business in Germany,sources familiar with the talks and sector bankers said. Lloyds could look at its UK business and Credit Agricole at the French one, the sources said.
It is not yet clear whether a successful share issue toDongfeng and the French state would remove the need for aspin-off of the financing arm, they said.
While a capital increase could relieve pressure on BPSA'scredit rating and financing costs, a partial sale of the unitcould help win EU clearance for the planned government cashinjection into Peugeot, they added.
Santander, UniCredit, Commerzbank, Lloyds declined tocomment. Credit Agricole was unavailable for immediate comment.
