French manufacturer PSA Group is to acquire GM’s Opel/Vauxhall subsidiary for €1.3bn (£1.12bn). It has also agreed to jointly acquire GM Financial’s European operations together with BNP Paribas, in a deal valuing the arm at €0.9bn.
Opel/Vauxhall generated revenue of €17.7bn in 2016, and sold 979,479 passenger cars in the year.
This, alongside PSA’s 1,446,052 cars, sold would have made the two combined comfortably the second largest automotive company in Europe last year, with a 17% market share.
According to the companies, the deal will allow for substantial economies of scale in purchasing, manufacturing and R&D.
PSA Group said it expected synergies between itself and Vauxhall/Opel to bring about savings worth €1.7bn by 2026, with a significant part of this coming before 2020.
As a result, it said it expects Opel/Vauxhall to reach a recurring operating margin of 2% by 2020 and 6% by 2026, and to generate a positive operational free cash flow by 2020.
GM and PSA also said they expected to collaborate in the further deployment of electrification technologies, and existing supply agreements for Holden and certain Buick models will continue.
PSA may potentially source long-term supply of fuel cell systems from a GM/Honda joint venture in the future.
Opel/Vauxhall will also continue to benefit from intellectual property licenses from GM until its vehicles progressively convert to PSA platforms over the coming years.
For the Financial arm, PSA teamed up with BNP Paribas Personal Finance, with each company agreeing to acquire 50% of the share capital of Opel/Vauxhall’s financing activities for a total of €0.9bn.
Carlos Tavares, PSA Group’s chairman of the Managing Board, said: “Opel / Vauxhall’s financing operations are critical to the development of the Opel and Vauxhall brands. We are proud to join our forces with BNP Paribas, a leading European banking partner, and are confident our complementary expertise will make this new partnership a success.”
Jean-Laurent Bonnafé, chief executive officer of BNP Paribas, said: “This partnership represents a great opportunity to further grow BNP Paribas Personal Finance’s footprint on the attractive automotive financing business and is fully in line with our strategic goals for 2020. We have been a longstanding banking partner of PSA Group and are delighted with this value-enhancing partnership around Opel / Vauxhall.
“We will capitalize on our highly complementary capabilities to best serve Opel and Vauxhall’s dealers and customers and support the Opel and Vauxhall brands.”
Both transactions are still subject to various closing conditions, including regulatory approvals and reorganizations, and are expected to close before the end of 2017.