Peugeot poised to buy GM’s Opel, creating a car giant
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France’s PSA Group is set to announce a deal to buy Opel from General Motors (GM.N) on Monday after striking an agreement with the U.S. carmaker and winning the blessing of its board for the acquisition.
The maker of Peugeot, Citroen and DS cars said on Saturday it would hold an early Monday press conference with GM, at which the transaction is expected to be presented after Reuters reported that a deal had been struck between the two automakers.
By acquiring Opel, the French group will leapfrog rival Renault (RENA.PA) to become Europe’s second-ranked carmaker after Volkswagen (VOWG_p.DE) by market share. Between them, PSA and GM Europe recorded 71.6 billion euros ($76 billion) in revenue and 4.3 million vehicle deliveries last year.
The tie-up was approved on Friday by the PSA supervisory board, on which the French government, Peugeot family and China’s Dongfeng (0489.HK) are represented as shareholders, one source with knowledge of the matter said.
Spokespeople for PSA and Opel declined further comment.
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 Paris-based PSA, sparking widespread concern over possible job cuts.
In their jointly issued invitation to a Paris press conference at 0815 GMT on Monday, PSA and GM gave no indication of its subject. Separate briefings for the German press and Opel unions are expected to be held the same day.
“Between them, PSA and GM Europe recorded 71.6 billion euros ($76 billion) in revenue and 4.3 million vehicle deliveries last year.”
Sources close to the talks had reported progress on Thursday after the carmakers narrowed differences on a near-$10 billion Opel pension deficit and other issues. GM’s European arm recently posted a 16th consecutive year of losses.
The negotiations had encountered problems over GM demands that a PSA-owned Opel be barred from competing against its own Chevrolet lineup in markets including China, they said.
But the “non-compete” issues were finally resolved as GM agreed to inject “substantially more” into the pensions than the $1 billion to $2 billion it had initially offered, another person said. The sources declined to give further details. Detroit-based GM, which came close to selling Opel to Magna (MG.TO) in 2009, has faced investor pressure to offload its struggling European arm 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 Chief Executive Mary Barra agreed to target a 20 percent minimum return on invested capital and pay out more cash to shareholders.
For PSA, the Opel deal caps a stellar two-year recovery under cost-cutting CEO Carlos Tavares, who said on Feb. 23 he would apply the same methods to Opel if the deal went through. PSA averted bankruptcy by selling 14 percent stakes to France and Dongfeng in 2014, to match a diluted Peugeot family holding.
The acquisition offered an “opportunity to create a European car champion” and quickly exceed 5 million annual vehicle sales, Tavares told analysts as he presented full-year earnings. PSA also expects savings of up to 2 billion euros ($2.1 billion) from the tie-up, sources have said.
Tavares also told his board that PSA would redevelop the Opel lineup with its own technologies to achieve rapid savings, according to people with knowledge of the matter.
Questions & Answers
Q.What is the expected timeline for the official announcement of this acquisition?
What is the expected timeline for the official announcement of this acquisition?
The deal between PSA and General Motors is expected to be announced at a press conference on Monday. Separate briefings are also planned for the German press and Opel unions on the same day.
Q.How will this acquisition affect PSA's position in the European car market?
How will this acquisition affect PSA's position in the European car market?
By acquiring Opel, PSA Group will surpass Renault to become Europe's second-largest carmaker by market share. This will place them behind Volkswagen in the region.
Q.What was a significant hurdle in the negotiations between PSA and GM?
What was a significant hurdle in the negotiations between PSA and GM?
A major challenge was resolving Opel's near-$10 billion pension deficit and GM's demands that a PSA-owned Opel not compete with its Chevrolet brand in markets like China.
Q.What benefits does PSA expect from this acquisition?
What benefits does PSA expect from this acquisition?
PSA anticipates achieving savings of up to 2 billion euros from the tie-up. The CEO also stated that the acquisition offers an opportunity to create a European car champion and exceed 5 million annual vehicle sales.
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