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PSA purchase of Vauxhall/Opel

  • Establishes PSA Group as No. 2 in Europe.
  • This strong and balanced presence in its home markets will serve as the basis of profitable growth worldwide
  • Joint venture in financing with BNP Paribas to support development of Opel/Vauxhall brands
  • GM and PSA to continue to collaborate on projects

GENERAL Motors and PSA Group today confirmed a £1.9 Bn Opel-Vauxhall deal under which the GM subsidiary and GM Financial’s European operations will join the PSA Group in a transaction valued at €1.3 Bn and €0.9 Bn, respectively – a combined total of £1.9 billion.

With the addition of Opel-Vauxhall, which generated revenue of €17.7 Bn (£15.29 Bn) in 2016, PSA will become the second-largest automotive company in Europe, with a 17% market share.

Half the funding for the purchase comes from BNP Paribas, as part of a broader new partnership with PSA Group announced alongside the deal. BNP Paribas is the parent company of Arval which is one of the world’s biggest leasing companies with more than a million vehicles in its global fleet.

Chris Bosworth, director of strategy at Close Brothers Motor Finance, commented on the new strategic partnership announced by PSA and BNP Paribas for the Opel and Vauxhall acquisition.

He said:There have long been rumours in the market that BNP Paribas were looking to enter the motor finance market in the UK – clearly, today’s announcement of a strategic partnership with the PSA Groupe could provide a good platform for them to do this.”

Opel-Vauxhall’s financing operations cover 11 European countries, serving nearly 1,800 dealers and have outstanding earning assets of ca. €9.6 Bn at year-end 2016, of which ca. €5.8 Bn are financed by deposits or securitisations.

The Opel-Vauxhall’s financing operations offer a full range of automotive financing products, including consumer loans, leases, dealer financing and insurance products, with a constant focus on optimising customer experience.

Carlos Tavares, chairman of the Managing Board of PSA, said of the Opel-Vauxhall deal: “We are proud to join forces with Opel-Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround.

“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 capitalising 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.

Mary T. Barra, GM chairman and chief executive officer, said: “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.

GM and PSA plan continued collaboration

“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 margin of 2% by 2020 and 6% by 2026, and to generate a positive operational free cash flow by 2020.

PSA/BNP Paribas joint venture

About BNP Paribas

  • BNP Paribas has a presence in 75 countries with more than 185,000 employees, including 145,000 in Europe. It ranks highly in its two core activities: Retail Banking & Services (comprised of Domestic Markets and International Financial Services) and Corporate & Institutional Banking.
  • In Europe, the Group has four domestic markets (Belgium, France, Italy and Luxembourg) and BNP Paribas Personal Finance is the leader in consumer lending. BNP Paribas is rolling out its integrated retail banking model across Mediterranean basin countries, in Turkey, in Eastern Europe and a large network in the western part of the United States.
  • In its Corporate & Institutional Banking and International Financial Services activities, BNP Paribas also enjoys top positions in Europe, a strong presence in the Americas and solid and fast-growing businesses in Asia-Pacific.

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.

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.

Jean-Laurent Bonnafé, chief executive officer of BNP Paribas, said: “This partnership represents a great opportunity to further grow BNP Paribas Personal Finance’s footprint on the attractive automotive financing business and is fully in line with our strategic goals for 2020.

“We have been a longstanding banking partner of PSA Group and are delighted with this value-enhancing partnership around Opel/Vauxhall. We will capitalise on our highly complementary capabilities to best serve Opel and Vauxhall’s dealers and customers and support the Opel and Vauxhall brands.”

Laurent David, CEO of BNP Paribas Personal Finance together with Remy Bayle, CEO of Banque PSA Finance, declared: “We are very pleased with this new venture and warmly welcome the employees of Opel/Vauxhall’s financing activities within our partnership.”

 

Chris Bosworth of Close Brothers said: “Certainly, it is interesting that the Banque PSA didn’t buy the business wholly on its own, as managing such a joint venture is not without its challenges. This is why, historically, manufacturers have tended to either stick with a captive finance house or use a bank as captive.

“Also of note was the valuation of 0.8x book value, which would indicate that the book isn’t particularly profitable. Given that BNP Paribas will need to fully consolidate the entity it’s hard to see how this will be value accretive for their shareholders, unless they can leverage the platform to really grow in the market through other channels.”

General Motors saod the transaction is another step in its 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.

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.

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