GM Buys Into Depressed Europe Via Peugeot

DETROIT ( TheStreet) -- GM ( GM) said it has signed a strategic alliance with French automaker Peugeot.

GM will buy 7% of PSA Peugeot Citroen, becoming the company's second-largest shareholder and strengthening its position in Europe at a time the valuation of European assets is low.

As part of the deal, Peugeot will raise about $1.3 billion through a rights offering, underwritten by a bank syndicate and an investment from the Peugeot family.

"This partnership brings tremendous opportunity for our two companies," said GM CEO Dan Akerson, in a statement. "The alliance synergies, in addition to our independent plans, position GM for long-term sustainable profitability in Europe."

Alliance synergies would include shared vehicle platforms as well as a joint venture combining about $125 billion in annual purchases of commodities, components, other goods and services. Synergies are expected to produce annual savings of $2 billion annually within five years, with little benefit in the first two years.

Initially, GM and PSA Peugeot Citroën would focus on small and midsized passenger vehicles, with the first vehicle on a common platform expected to launch by 2016.

-- Written by Ted Reed in Charlotte, N.C.

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