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PSA expects a 2 pc operating profit margin at Opel in three years (Photo: Opel)

PSA/Peugeot-Citroen and General Motors confirmed Monday that the French carmaker will acquire Opel, its British sister company Vauxhall, and half of GM's European finance arm for a combined 2.2 billion euros.

The two companies said in a press release that the acquisition will make the Peugeot Group Europe's second-largest automaker after Volkswagen, with 17.7 billion euros in revenue and a 17 pc share of the European market.

"We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround," PSA CEO Carlos Tavares said.

GM contemplated selling its loss-making German subsidiary to Canadian supplier Magna International in 2011, but changed its mind at the last minute. Following the arrival of a new CEO, Karl-Thomas Neumann in 2013, Opel has improved its performance, but hasn't managed to make a profit.

For GM, the sale of Opel means it can now concentrate on growing its domestic US business and solidifying its strong position in the Chinese market. CEO Mary Barra said the sale has "created a new opportunity to enhance the long-term performance of our respective companies."

The US carmaker will take a non-cash special charge of between 4 billion and 4.5 billion dollars for the sale.

PSA expects annual synergies between Opel and its Peugeot and Citroen brands of around 1.7 billion euros by 2026. A significant part of these benefits, which would result from economies of scale in purchasing, manufacturing and R&D, could be realized as early as 2020, the company said.

Building on these cost savings and other operational improvements, PSA said it expects Opel to have an operating profit margin of 2 pc by 2020 and 6 pc by 2026.

As part of the transaction, GM will receive warrants to purchase PSA shares equal to 4.2 pc of the French company's share capital. The US carmaker will not have voting rights and will sell the shares within 35 days of exercising the warrants.

The two companies said they would cooperate in electrification technologies, while PSA may acquire fuel cell systems from a joint venture GM operates with Japan's Honda.

GM's European finance operations will be acquired half by PSA and half by French banking group BNP Paribas.