PSA Group, the maker of Peugeot and Citroen cars, is exploring an acquisition of General Motors’s European business to cement a top position in Europe in a deal that could hasten consolidation of the crowded industry.
GM and the French carmaker are in talks on numerous strategic initiatives, including the possible sale of Opel to PSA, the companies said, adding there was no assurance an agreement will be reached.
The US manufacturer is seeking a multi-billion dollar amount for Opel, which also operates UK sister brand Vauxhall, because of the outlook for the improved operations, according to a source.
Analysts at Macquarie estimated that Opel has an enterprise value of about €2.6bn.
“Opel is strategically a good fit for PSA, complementing its exposure to the European car market,” said Jose Asumendi, an analyst for JP Morgan.
“The leap of faith in this transaction” would be the prospects for PSA to restructure Opel in Germany, “a situation which could be potentially more challenging” than its cost-cutting in France.
A combination would create a manufacturer with about 16% of the European car market, pushing past Renault as the region’s second-biggest car group after Volkswagen. A deal would also be the second run at linking the two mass-market carmakers. GM, which has controlled Opel for nearly 90 years, sold a 7% stake in its French counterpart in 2013.
PSA shares rose 4.3%, valuing the French company at €16.2bn. GM jumped at one stage 5% in New York trading. European rivals Renault and Fiat Chrysler climbed 4.1% and Renault advanced 3.1% as the deal could serve as a catalyst for squeezing excess capacity from the European car market.
While an agreement could be reached in the coming weeks, negotiations are complex and could still fall apart, said people familiar with the matter. PSA is considering the takeover to boost its scale, get access to Opel’s engineering and electric-car technology as well as reap savings from joint purchasing and eventually cut costs, according to one source.
For GM, it would mark a clean exit from Europe, especially after the UK vote to leave the EU weighed on sterling and GM’s operations in the country, the source said.
In Ireland, a surge in demand for new Opel cars had resulted in revenues at the Irish arm of General Motors increasing by 22% to over €120.8m, in 2015.
Opel sales had increased 18% to 7,483 in 2015 according to figures from industry group the Society of the Irish Motor Industry.
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