Jaguar Land Rover owner Tata Motors has been forced to deny that it is on the verge of selling the British luxury car brand to the French owner of Peugeot.

Britain’s biggest carmaker has been mooted as a potential target for PSA Group – the owner of brands including Peugeot, Citroën and Vauxhall – for months amid reports that India’s Tata was growing frustrated with JLR’s struggles.

A “post-sale integration document” has been passed around senior executives at the companies, detailing the potential benefits of a tie-up, the Press Association reported on Thursday. However, both carmakers denied a sale is in the offing.

In a statement, Tata Motors said: “As a matter of policy, we do not comment on media speculation. But we can confirm there is no truth to these rumours.”

A spokeswoman for PSA Group said the company was “open to all opportunities that would create value on a long-term basis”, but said there was “no hurry” for PSA to make an acquisition of JLR or any other carmaker.

PSA boss Carlos Tavares last month made it clear in an interview that he would consider a bid for JLR, among other carmakers but added that he did not want such a deal to be a “distraction”.

JLR’s sales performance has stuttered in recent months. Retail sales fell by 6.4% in the final three months of 2018, a decline that was almost entirely caused by a drop of more than 40% in China.

That weakness followed a long period in which the premium segment of the global car market outperformed less expensive models. However, the poor recent performance has forced the company to scale back operations.

In February JLR announced its biggest quarterly loss after it was forced to write down the value of its investments by £3.1bn as Chinese demand slumped. Later that month it announced plans to cut 4,500 jobs from its global workforce, the majority of them management roles in the UK at sites including Coventry and Gaydon.

JLR has just under 40,000 employees worldwide, the majority of them in the UK, but it is dwarfed by PSA in terms of scale and sales volumes. JLR made revenues of £24.6bn in 2018, compared with PSA’s €74bn (£64bn) in the same period, while in the final three months of 2018 JLR sold 144,600 cars, against 995,100 by PSA Group.

A purchase by a larger carmaker would also help JLR to make the major investments in new technology that will be necessary as carmakers prepare for the transition away from internal combustion engines to electric and autonomous technology.

Philippe Houchois, an automotive analyst at investment bank Jefferies, said an acquisition of JLR by PSA was a possibility, but would not be the “transformational” deal that PSA is eyeing. Industry observers believe a merger of equals with Italy’s Fiat Chrysler Automobiles is under consideration.

“JLR would welcome some help no doubt in terms of trying to get some scale,” he said. “It’s not clear what it adds to [PSA’s] core business.”

However, the successful performance of PSA in its last major acquisition – the £1.9bn purchase of the Opel and Vauxhall brands from US carmaker General Motors in 2017 – has given it scope to look at a wider variety of options, Houchois added.

Tavares, who made his name as Carlos Ghosn’s lieutentant in his turnaround of Renault, in February hailed Opel–Vauxhall’s first annual profits in 20 years after a major cost-cutting plan. The rapid improvement included hundreds of job cuts.

Any deal between PSA and Tata would be likely to be complicated by Brexit. JLR last month temporarily closed its factories in case of a chaotic departure, but the threat of a no-deal Brexit continues to loom at the end of October, the scheduled date of departure.

Tavares in February warned that the carmaker would not shy away from unpopular decisions, including shutting British factories if there is a no-deal Brexit, which would threaten the futures of Vauxhall’s plants in Luton and Ellesmere Port.