The value of General Motors shares could climb as much as 35 percent if the automaker sells its European Opel-Vauxhall unit and focuses on more lucrative markets. That much is according to a Barron’s report released on Sunday.
Last week, General Motors confirmed that it was in talks to sell its European Opel-Vauxhall brands and operations to PSA Group, which markets the Peugeot and Citroen brands.
If successful, the deal could net GM up to $2 billion in cash as well as possible continuous licensing fees from PSA. Citing analysts, Barron’s pegs the initial cash figure to be $1 billion. The firm also indicated that the true value of the deal would come in the form of taking a money-losing business off GM’s hands, thereby allowing it to focus on operations in North America, China, and Latin America.
For the 2016 calendar year, General Motors reported a $257 operating loss from its European Opel-Vauxhall division. Besides cutting the losses, Barron’s says that GM could also gain almost $1 billion in additional annual cash flow.
In addition, the successful sell-off of Opel would indicate to investors that GM Chief Executive, Mary Barra, is not afraid to cut ties with business components that detract from the bottom line, electing to focus on those elements that generate value instead.
GM shares are trading around $37 on Monday, February 20th.