General Motors Co and PSA Group announced Monday that GM's Opel and Vauxhall subsidiary and GM Financial's European operations will join the PSA Group in a transaction valued at 2.2 billion euros.

The 1.3-billion-euro Opel and Vauxhall subsidiary merger will allow substantial economies of scale in purchasing, manufacturing and research and development, according to GM's news release. With the addition of Opel and Vauxhall, which generated 17.7 billion euros in revenue in 2016, PSA will become the second-largest automotive company in Europe, with a 17 percent market share.

Annual revenues of 1.7 billion euros are expected by 2026 – of which a significant part is expected to be delivered by 2020, accelerating Opel and Vauxhall's turnaround. Leveraging the successful partnership with GM, PSA expects Opel and Vauxhall to reach a recurring operating margin of 2 percent by 2020 and 6 percent by 2026, and to generate a positive operational free cash flow by 2020.

PSA, together with BNP Paribas, will also acquire all of GM Financial's European operations for 900 million euros, through a newly formed 50/50 joint venture that will retain GM Financial's current European platform and team.