Shares in Mitsubishi Motors Corp jumped 18% today following a report that French carmaker PSA Peugeot Citroen will buy a 30 to 50% stake in Japan's fourth largest manufacturer.
The Nikkei business daily said Peugeot Citroen will spend up to 300bn yen (€2.26bn) to acquire the stake in Mitsubishi.
Investors took heart from the report, lifting shares in Mitsubishi by 17.6% to 140 yen in the morning session.
Mitsubishi declined to confirm the report, which gave no sources. But the Japanese company issued a statement saying: "There are no facts to be announced."
The paper said Peugeot Citroen - Europe's second biggest car company - and Mitsubishi are in the final stages of capital tie-up talks.
The deal could effectively put Mitsubishi under Peugeot Citroen's control, creating the world's sixth largest automobile alliance.
The French carmaker may seek more than a 50% stake in Mitsubishi, hoping to tap into Mitsubishi's expertise in electric vehicles and other environmental technology, the paper said.
A spokeswoman in Tokyo for Peugeot Citroen Japan declined to comment on the report.