PARIS (Reuters) -- French minority shareholders' group ADAM has written to PSA/Peugeot-Citroen to criticize the terms of a planned capital hike that will see China's Dongfeng and the French state take big stakes in the carmaker, a French newspaper said.
The letter to PSA's chairman, Thierry Peugeot, questions the terms of a proposed 3 billion euro ($4.1 billion) capital increase that will see Dongfeng and the French government investing on equal terms to each take a 14 percent share in the company, Les Echos reported.
"The sizeable portion taken up by the state may ward off other potential investors and make it more difficult to seal alliances with other carmakers," the paper quoted the letter as saying.
ADAM said the French government, Dongfeng and the Peugeot family may be considered as acting together in the proposal, potentially triggering an offer to buy out minority stockholders.
An investor whose stake exceeds 30 percent must make an offer for all other shares under French market rules. The possible combined holdings of France, Dongfeng and the Peugeot family would total 42 percent.
ADAM, which owns six PSA shares, hasn't been mandated to represent other shareholders in the carmaker yet, ADAM President Colette Neuville said.
Stockholders should be treated "in a fair manner" that protects them from, or compensates them for, possible dilution of their stakes by the larger investors, Neuville told Bloomberg.
The planned stock sale would need the formal approval of at least 66 percent of voting investors at a shareholders meeting.
The Peugeot family, which currently holds about 25.5 percent of the shares and 38.1 percent of the voting rights, decided last week to back the capital increase, according to people familiar with the matter.
Last month, Thierry Peugeot wrote to his cousin Robert Peugeot, head of the FFP family holding, to also criticize the tie-up that would dilute the family's influence, according to sources.
The Peugeot clan currently controls PSA through a 25 percent stake commanding 38 percent of voting rights.
PSA pledged to reduce its cash consumption by at least 50 percent to 1.5 billion euros in 2013.
The company already builds vehicles in partnership with Dongfeng in China and is deepening tires with the Chinese automaker after a failed attempt to build a far-reaching alliance with General Motors Co.
Bloomberg contributed to this report