France's PSA agrees €2.2bn deal for Opel
France's PSA Group has agreed a €2.2bn deal to buy Opel from General Motors, creating a new European 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 2pc within three years and 6pc by 2026 underpinned by €1.7bn in joint cost savings. PSA shares jumped as much as 5.2pc after ceo Carlos Tavares said GM's European arm could be turned around using lessons from the French group's own recovery. Opel recently recorded its 16th consecutive full-year loss.
PSA leapfrogs French rival Renault to become Europe's second-ranked carmaker by sales, with a 16pc market share to VW's 24pc. The disposal seals GM's exit from Europe and ends a relationship dating back to the 1920s.
Last year, PSA and GM Europe recorded a combined €72bn in revenue and 4.3 million vehicle deliveries. GM will receive €1.32bn for the Opel manufacturing business in the form of €650m in cash and €670m in PSA share warrants.
An additional €900m will be paid by the Paris-based carmaker and BNP Paribas for Opel's financing arm.
The deal caps a stellar two-year recovery for PSA, which avoided bankruptcy in 2014 by selling 14pc stakes to the French state and China's Dongfeng.
PSA reiterated pledges to run Opel as a distinct German subsidiary and honour existing job guarantees. Beyond those horizons, however, the outlook may be less certain.
Britain's EU exit adds to the uncertainty over Vauxhall's UK plants at Ellesmere Port and Luton. (Reuters)