GM Sale of Opel to PSA Valued at $2 Billion

With a valuation of $2 billion, negotiations over the sale of GM’s European brand, Opel, to the PSA group have advanced with the possibility of an agreement to be made as early as next week, sources familiar with the matter said.

The value assessment is comprised of roughly $1 billion in cash and about $1 billion in liabilities, but the amount is still fluid, according to the sources who wish not to be identified as negotiations are private.The valuation does not include Opel’s sister brand Vauxhall.

A deal could be reached next Thursday, the same day the PSA group, maker of Peugeot and Citroen cars, is set to report the company’s full-year earnings, the sources say. While still making the deal financially feasible, negotiators must also find a way to reduce costs in order to earn more support from the government and unions, which is important. Additionally, before the deal can be finalized, the PSA group must figure out how a combined PSA-Opel company can maintain U.K production capacity going into the future with soon-to-be redesigned models, meaning negotiations can still be delayed.

The partnership “could release substantial synergies and improve PSA’s market position in Europe where the company continuously lost market share since 2010,” Falk Frey, a Moody’s Investors Service analyst reported. “Diversification within Europe would increase as Opel is strong in markets where PSA is not,” he added.

With losses totaling about $9 billion since 2009, GM is very motivated for the sale. Pushing for the deal, GM’s CEO Mary Barra visited with Opel management on Wednesday and GM President Dan Ammann held meetings with officials in Germany and the U.K. this past week.

“What is pretty clear is that the negotiations with Peugeot are advanced and more concrete proposals are imminent,” Len McCluskey, the general secretary of Unite union that represents Vauxhall (Opel’s sister brand), told reporters on Thursday.

Source: Bloomberg

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