Peugeot Manufacturer Buys Opel $2.3bn

Peugeot
  • Peugeot Manufacturer Buys Opel $2.3bn

PSA Group, makers of Peugeot and Citroen cars has agreed to buy Opel from General Motors (GM) for 2.2 billion euros ($2.3 billion).

With the buy up of Opel, PSA will become a new regional car giant to challenge market leader Volkswagen.

PSA Chief Executive Carlos Tavares vows to make Opel and its British Vauxhall brand to profit, with an operating margin of 2 percent within three years and 6 percent by 2026.

“We’re confident that the Opel-Vauxhall turnaround will significantly accelerate with our support,” Tavares said in a statement.

By acquiring Opel, PSA goes ahead of its Renault to become Europe’s second-ranked carmaker in terms of sales.

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 (MG.TO), 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 (FCHA.MI) 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.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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