Opel and Vauxhall To Join Peugeot.SA Group

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Opel and Vauxhall To Join Peugeot.SA Group

PSA became the second-largest automotive company in Europe, with a 17% market share after the addition of Opel/Vauxhall, which generated revenue of AED 74 Bn in 2016.
The news came after General Motors Co. and PSA Group announced an agreement where GM’s Opel/Vauxhall subsidiary and GM Financials’ European operations now join the PSA Group. The transaction was valued at AED 54 Bn and AED 3.76 Bn, respectively.

 



The agreement is very beneficial as it created a sound European foundation for PSA to support its worldwide profitable growth as well as advanced GM’s transformation.
Both of the companies are big names in the automotive industry and are going to be hugely benefitted by this association. The transaction will facilitate substantial economies of scale and synergies in buying, manufacturing, and R&D. The expected annual synergy of AED 7 Bn is evaluated to become reality by 2026 of which a huge amount is expected to be delivered by 2020, accelerating Opel/Vauxhall’s turnaround. Empowering the successful partnership with GM, PSA expects Opel/Vauxhall to reach a repetitive operating margin of 2% by 2020 and 6% by 2026, and to generate a positive operational free cash flow by 2020.
A newly formed 50%/50% joint venture, that will retain GM Financials current European Platform team, will enable PSA, together with BNP Paribas, to acquire all of GM Financial’s

 



European operations
. This joint venture will be fully combined by BNP Paribas and accounted under the equity method by PSA.

GM’s ongoing work to transform the company is behind this transactional step. The transformational work has delivered three years of record performance and a strong 2017 outlook, also has returned significant capital to shareholders. Also bound to strengthen GM’s core business these plans are bound to reach long term. They will prove to be beneficial in supporting the company’s continued deployment of resources to higher-return opportunities including in advanced technologies driving the future and unlock significant value for shareholders.

 

 

The transaction will enable GM to lower the cash balance requirement under its capital allocation framework by AED 7 Bn by immediately improving EBIT-adjusted, EBIT-adjusted margins and adjusted automotive free cash flow and de-risking the balance sheet. The amount generated by the transaction will be used to accelerate share repurchases, subject to market conditions.

The future plans go long way as GM is empowered due to its ownership of warrants to purchase shares of PSA, hence will also participate in the future success of the combined entity. 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. Also, PSA may potentially source long-term supply of fuel cell systems from the GM/Honda joint venture.

 

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