Peugeot owner explores acquisition of GM’s European division

Bloomberg

PSA Group, the maker of Peugeot and Citroen cars, is exploring an acquisition of General Motors Co.’s European business in a deal that would transform the region’s automotive landscape.
The French carmaker is in talks on numerous strategic initiatives, including the possible acquisition of Opel, a PSA spokesman said by phone after Bloomberg reported the talks earlier on Tuesday. GM is seeking a multi-billion dollar amount for Opel, which also operates UK sister brand Vauxhall, because of the outlook for improved operations, according to a person familiar with the matter. Negotiations on valuations are ongoing, the person said.
“I can see why GM may possibly seek to sell its European division, which hasn’t made money in many years,” said George Galliers, an analyst with Evercore ISI. “It is less clear why Peugeot would be interested in buying GM’s assets. The purchase would give them capacity in Germany, one of the most expensive countries to produce cars and would lead to excess capacity.”
A combination would create a manufacturer with about 16 percent of the European car market, leapfrogging Renault SA to become the region’s second-biggest auto group after Volkswagen AG. 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 percent stake in its French counterpart in 2013 after savings from a cooperation fell short of expectations. PSA shares rose 4.9 percent to 18.81 euros at 1:04 p.m., valuing the company at 16.3 billion euros ($17.3 billion). While an agreement could be reached in the coming weeks, negotiations are complex and could still fall apart, said people familiar with the matter, who asked not to be identified because discussions are private.

VOLUME BOOST
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 cost cuts, according to one of the people. For GM, it would mark a clean exit from Europe, especially after the UK vote to leave the European Union weighed on the British pound and profits, the person said.