Peugeot Buys Opel for $2.3B
March 6, 2017
General Motors and PSA Group have
made an agreement under which GM’s Opel/Vauxhall subsidiary and GM
Financial’s European operations will join the PSA Group in a transaction
valuing these activities at €1.3 Bn and €0.9 Bn, respectively.
With the addition of Opel/Vauxhall, which generated revenue of €17.7 Bn
in 20161, PSA will become the second-largest automotive company in
Europe, with a 17% market share2.
“We are proud to join forces with Opel/Vauxhall and are deeply committed
to continuing to develop this great company and accelerating its
turnaround,” said Carlos Tavares, chairman of the Managing Board of PSA.
“We respect all that Opel/Vauxhall’s talented people have achieved as
well as the company’s fine brands and strong heritage. We intend to
manage PSA and Opel/Vauxhall capitalizing on their respective brand
identities. Having already created together winning products for the
European market, we know that Opel/Vauxhall is the right partner. We see
this as a natural extension of our relationship and are eager to take it
to the next level.”
“We are confident that the Opel/Vauxhall turnaround will significantly
accelerate with our support, while respecting the commitments made by GM
to the Opel/Vauxhall employees,” continued Mr. Tavares.
“We are very pleased that together, GM, our valued colleagues at
Opel/Vauxhall and PSA have created a new opportunity to enhance the
long-term performance of our respective companies by building on the
success of our prior alliance”, said Mary T. Barra, GM chairman and
chief executive officer.
“For GM, this represents another major step in the ongoing work that is
driving our improved performance and accelerating our momentum. We are
reshaping our company and delivering consistent, record results for our
owners through disciplined capital allocation to our higher-return
investments in our core automotive business and in new technologies that
are enabling us to lead the future of personal mobility.
“We believe this new chapter puts Opel and Vauxhall in an even stronger
position for the long term and we look forward to our participation in
the future success and strong value-creation potential of PSA through
our economic interest and continued collaboration on current and
exciting new projects,” Ms. Barra concluded.
The transaction will allow substantial economies of scale and synergies
in purchasing, manufacturing and R&D. Annual synergies of €1.7 Bn are
expected by 2026 – of which a significant part is expected to be
delivered by 2020, accelerating Opel/Vauxhall’s turnaround. Leveraging
the successful partnership with GM, PSA expects Opel/Vauxhall to reach a
recurring operating margin3 of 2% by 2020 and 6% by 2026, and to
generate a positive operational free cash flow4 by 2020.
PSA, together with BNP Paribas, will also acquire all of GM Financial’s
European operations through a newly formed 50%/50% joint venture that
will retain GM Financial’s current European platform and team. This
joint venture will be fully consolidated by BNP Paribas and accounted
under the equity method by PSA.
The transaction is another step in GM’s ongoing work to transform the
company, which has delivered three years of record performance and a
strong 2017 outlook, and returned significant capital to shareholders.
It will strengthen GM’s core business, support its continued deployment
of resources to higher-return opportunities including in advanced
technologies driving the future, and unlock significant value for
By immediately improving EBIT-adjusted, EBIT-adjusted margins and
adjusted automotive free cash flow and de-risking the balance sheet, the
transaction will enable GM to lower the cash balance requirement under
its capital allocation framework by $2 Bn, which it intends to use to
accelerate share repurchases, subject to market conditions.
GM will also participate in the future success of the combined entity
through its ownership of warrants to purchase shares of PSA. GM and PSA
also expect to collaborate in the further deployment of electrification
technologies and existing supply agreements for Holden and certain Buick
models will continue, and PSA may potentially source long-term supply of
fuel cell systems from the GM/Honda joint venture.
Terms of the Agreement
Opel/Vauxhall automotive operations will be acquired by PSA for €1.3 Bn.
GM Financial’s European operations will be jointly acquired by PSA and
BNP Paribas for 0.8 times their pro forma book value at the closing of
the transaction, or approximately €0.9 Bn.
The transaction has a total value of €2.2 Bn, for Opel/Vauxhall
automotive operations and 100% of GM Financial’s European operations.
The transaction value for PSA, including Opel/Vauxhall and 50% of GM
Financial’s European operations, will be €1.8 Bn.
In connection with this transaction, GM or its affiliates will subscribe
warrants for €0.65 Bn. These warrants have a nine-year maturity and are
exercisable at any time in whole or in part commencing 5 years after the
issue date, with a strike price of €1. Based on a reference price of
€17.34 for the PSA share5, the warrants correspond to 39.7 MM shares of
PSA, or 4.2% of its fully diluted share capital6. GM will not have
governance or voting rights with respect to PSA and has agreed to sell
the PSA shares received upon exercise of the warrants within 35 days
The transaction includes all of Opel/Vauxhall’s automotive operations,
comprising Opel and Vauxhall brands, six assembly and five
component-manufacturing facilities, one engineering center (Rüsselsheim,
Deutschland) and approximately 40,000 employees. GM will retain the
engineering center in Torino, Italy.
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.
In connection with the transaction, GM will take a primarily non-cash
special charge of $4.0-4.5 Bn.
Ongoing Pension Fund Commitments
All of Opel/Vauxhall’s European and U.K. pension plans, funded and
unfunded, with the exception of the German Actives Plan and selected
smaller plans will remain with GM. The obligations with respect to the
German Actives Plan and these smaller plans of Opel/Vauxhall will be
transferred to PSA. GM will pay PSA €3.0 Bn for full settlement of
transferred pension obligations.
transaction is subject to various closing conditions, including
regulatory approvals and reorganizations, and is expected to close
before the end of 2017.
The issuance of the warrants is subject to the vote of shareholders at
PSA’s General Meeting of May 10th, 2017. The three main shareholders of
PSA (the French State, the Peugeot family and DongFeng) representing in
aggregate 36.6% of the share capital and 51.5%7 of the voting rights of
PSA have undertaken to vote in favor of the resolution related to the
issuance of the warrants to GM. In the event the warrant issuance
reserved to GM and its affiliates is not approved by PSA’s General
Meeting, PSA will settle the €0.65 Bn in cash over five years.