PSA Group has reached an agreement with General Motors to purchase GM’s European operations — which include the Opel and Vauxhall brands, as well as GM Financial’s European operations — for 2.2 billion euros.

This acquisition, noted Carlos Tavares, chairman of PSA’s managing board, will position PSA Group as the second-largest auto manufacturer in Europe, solely behind Volkswagen.

“This acquisition has become a game changer for PSA, as we become a 55 billion euro auto revenue company with a robust second position in the European market,” said Tavares.

As part of the agreement, PSA Group will purchase the Opel and Vauxhall brands for 1.3 billion euro. PSA Group and BNP Paribas will jointly acquire GM Financial’s European operations for about 900 million euros, split evenly among the two companies, noted GM President Dan Ammann during a press conference announcing the acquisition.

The acquisition of Opel and Vauxhall brands will include all of the brands’ operations, six assembly and five component manufacturing facilities, one engineering center in Rüsselsheim, Deutschland, and approximately 40,000 employees. However, GM will retain the engineering center in Torino, Italy.  

Opel and Vauxhall will also continue to benefit from the intellectual property licenses from GM until their vehicles progressively convert to PSA Group platforms over the next few years, added Ammann. The first two of three vehicles to emerge from Opel’s collaboration with both PSA Group and GM will be the Opel Crossland X and Opel Grandland X.

With the exception of the German active employee plan and a handful of other smaller plans, European and UK pension plans will also be remaining with GM. The smaller plans and German active employee plan will be fully funded by GM and then transferred to PSA Group, said Ammann.

During the Q&A portion of the press conference, Marry Barra, CEO of GM, was asked if the decision to sell off GM’s European operations was motivated by Brexit. Barra said that the decision was not motivated by Brexit. However, during the press conference, she did note that the businesses would have broken even if it had not been for Brexit.

She added that the companies have been a part of GM since the 1920’s and that the decision to sell them off was a difficult one to make.  

“[Opel and Vauxhall] have played meaningful roles in expanding the freedom and opportunity that was part of the transportation revolution,” said Barra. “Their work has produced some of the world’s most exciting automobiles … and their contributions to the future will continue to have a lasting impact on the industry and the world.”

By reducing balance sheet risk, improving cash flow and margins, this transaction, she added, will allow GM to unlock $2 billion in capital. The company intends to then use that $2 billion to accelerate share repurchases, subject to market conditions.

“The key to our future momentum is agility and speed; this requires prioritization and thoughtful decisions about where we put resources, and today’s announcement is yet another step to advance our progress,” said Barra.

Opel is expected to be profitable and will generate operation free cash flow by 2020, according to Jean-Baptiste, executive vice president, Finance. PSA Group expects Opel and Vauxhall to reach a recurring operating margin of 2% by 2020 and 6% by 2026.

Opel and Vauxhall sold 1.6 million units in 2016. Additionally, the companies generated 17.7 billion euros in revenue in that same year. After the acquisition of the two brands, PSA Group will hold a 17% market share in Europe, excluding the markets in Russia and Turkey.