Paris/Frankfurt – General Motors revealed that PSA Group has decided to buy the Opel brand in a deal valued at 2.2 billion euros ($2.3 billion).
The deal will see PSA Group increase its market share as well as garner a huge advantage over Renault in the European market and will challenge market leader Volkswagen.
PSA Group says that it has a plan already in place that will bring Opel and its British Vauxhall brand out of the red and in the blue. According to PSA Group they would bring Opel to profit with an operating margin of 2 per cent within three years and 6 per cent by 2026 underpinned by with 1.7 billion euros in joint cost savings.
With Opel’s acquisition, PSA Group has become Europe’s second-ranked carmaker by sales with a 16 percent market share to VW’s 24 percent. Last year, PSA and GM Europe recorded 72 billion euros in revenue and 4.3 million vehicle deliveries between them.
GM will receive 1.32 billion euros for the Opel manufacturing business – 650 million euros in cash and 670 million in PSA share warrants.
The Paris-based carmaker and BNP Paribas will pay a further 900 million euros for the Opel financing arm and operate it as a joint venture, fully consolidated by the French bank.
The sale of Opel seals GM`s exit from Europe. Eight years after coming close to selling Opel to Magna International, the Detroit auto giant has faced investor pressure to offload the business and focus on raising profitability rather than chase the global sales crown currently held by VW.
After fending off 2015 merger overtures by Fiat Chrysler with support from her board, GM boss Mary Barra agreed to target a 20 percent minimum return on invested capital and pay out more cash to shareholders.
The two carmakers, which already share some production in an existing European alliance, confirmed last month they were negotiating an outright acquisition of Opel and its British Vauxhall brand by PSA, sparking concern over possible job cuts.
The transaction also sees GM retain most of Opel`s pensions deficit, estimated by analysts at $10 billion. Earlier in the talks, the U.S. carmaker had sought to offload a larger share of the liabilities, sources have said.
Some smaller pension funds will be transferred to PSA, along with a 3 billion euro payment to cover their full settlement, the companies said on Monday. GM will also take an accounting charge of $4 billion to $4.5 billion in relation to the deal, expected to close in late 2017.