- Establishes PSA Group as #2 in Europe. This strong and balanced presence in its home markets will serve as the basis of profitable growth worldwide
- Joint venture in auto financing with BNP Paribas to support development of Opel/Vauxhall brands
- €2.2 Bn transaction advances GM’s transformation and unlocks shareholder value through disciplined capital allocation
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Change of ownership at Opel/Vauxhall: PSA Group CEO, Carlos Tavares and GM CEO, Mary Barra at the press conference in Paris. |
General Motors Co. and PSA Group today announced 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.
Creates sound European foundation for PSA to support its worldwide profitable growth
“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.”
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Summit in Paris: PSA Group CEO, Carlos Tavares; GM CEO, Mary Barra and Opel CEO, Dr. Karl-Thomas Neumann. |
“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.
Advances GM’s Transformation and Unlocks Value
“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 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.
Strengthens Each Company for the Long Term
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
shareholders.
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.
Additional Information
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 after exercise.
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, Germany) 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.
Closing Conditions
The transaction is subject to various closing conditions, including
regulatory approvals and reorganizations, and is expected to close
before the end of 2017.
Warrants
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.
About PSA Group
With sales and revenue of €54 billion in 2016, PSA Group designs
unique automotive experiences and delivers mobility solutions that
provide freedom and enjoyment to customers around the world. The Group
has three car brands, Peugeot, Citroën and DS, as well as a wide array
of mobility and smart services under its Free2Move brand, to meet the
evolving needs and expectations of automobile users. The automobile manufacturer PSA is the European leader in terms of CO2 emissions, with average emissions of 102.4 grams per kilometer in 2016,
and an early innovator in the field of autonomous and connected cars,
with 2.3 million such vehicles worldwide. It is also involved in
financing activities through Banque PSA Finance and automotive equipment
via Faurecia.
PSA Group Forward-Looking Statements
This press release includes forward-looking statements and
information about the objectives of PSA Group, in particular, relating
to the acquisition of GM’s Opel/Vauxhall subsidiary and GM Financial’s
European operations, and corresponding expected synergies. These
statements are sometimes identified by the use of the future tense or
conditional mode, as well as terms such as “estimate”, “believe”, “have
the objective of”, “intend to”, “expect”, “result in”, “should” and
other similar expressions. It should be noted that the realization of
these objectives and forward-looking statements is dependent on the
circumstances and facts that arise in the future. Forward-looking
statements and information about objectives may be affected by known and
unknown risks, uncertainties and other factors that may significantly
alter the future results, performance and accomplishments planned or
expected by PSA Group. These factors may include changes in the economic
and geopolitical situation and more generally those detailed in Chapter
1.5 of the reference document filed with the Autorité des marchés
financiers (the “AMF”) on 24 March 2016 under no. D.16-0204.
1 Opel/ Vauxhall financials correspond to financials of the contributed entity
2 Excluding Russia and Turkey. Source: IHS (February 2017)
3 IFRS. Subject to full review of US GAAP – IFRS differences
4 Defined as recurring operating income + D&A – restructuring costs – capex – capitalized R&D – change in working capital
5 Reference price is the 20-day volume-weighted average share price of PSA as of February 13th, 2017 (pre-leak of February 14th, 2017)
6 Based on 907 MM fully diluted shares outstanding
7 Based on a fully diluted number of shares outstanding of 907 MM shares, pro forma the exercise of all outstanding 2014 warrants
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