PARIS/FRANKFURT (Reuters) – PSA Group has agreed to buy Opel from General Motors in a deal valuing the business at 2.2 billion euros ($2.3 billion), the companies said on Monday, creating a new regional car giant to challenge market leader Volkswagen.
The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, targeting an operating margin of 2 percent within three years and 6 percent by 2026 underpinned by 1.7 billion euros in joint cost savings.
PSA shares jumped 4 percent after Chief Executive Carlos Tavares said GM’s European arm could be turned around using some of the lessons from the French group’s own recovery.
“We’re confident that the Opel-Vauxhall turnaround will significantly accelerate with our support,” he said.
By acquiring Opel, PSA leapfrogs French rival Renault to 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 a combined 72 billion euros in revenue and 4.3 million vehicle deliveries.
GM will receive 1.32 billion euros for the Opel manufacturing business – 650 million euros in cash and 670 million in PSA share warrants.
An additional 900 million euros will be paid by the Paris-based carmaker and BNP Paribas for Opel’s financing arm, to be operated jointly and consolidated by the French bank.
The sale of Opel seals GM’s exit from Europe. Eight years after coming close to a sale to Canada’s Magna International, the Detroit auto giant has faced renewed 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.