PSA Pegout SA (PEUGF) shares surged to a near five-and-a-half year high Monday after it purchased General Motors' (GM) - Get Report Opel subsidiary and the captive financing units of the carmaker's European brands.

PSA will buy the Open and Vauxhall brands for around €1.3 billion while PSA and BNP Paribas will take joint 50% stakes in Opel/Vauxhall financing for around €900,000, the companies said in a statement, creating Europe's second-largest carmaker behind Volkswagen AG (VLKAY) with a 17% market share. Opel and Vauxhall has around €17.7 billion in revenues last year. Peugeot's 2016 revenues were €54 billion, €37 billion of which came from automotive sales.

Peugeot shares gained 2.18% in the first hour of trading in Paris to change hands at €19.45 each, the highest since September 2011, while GM shares ended Friday's session in New York up 1.24% at $38.23 each.

"We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround," said CEO Carlos Tavares. "We respect all that Opel/Vauxhall's talented people have achieved as well as the company's fine brands and strong heritage. We intend to manage PSA and Opel/Vauxhall capitalizing on their respective brand identities."

"Having already created together winning products for the European market, we know that Opel/Vauxhall is the right partner," Tavares added. "We see this as a natural extension of our relationship and are eager to take it to the next level."

GM will get around €1.32 billion, including €650 million in cash and €670 million in PSA warrants, for the sale of the Opel/Vauxhall operating divisions. The sale of the captive financing units will earn GM around €900,000 and save it around $2 billion cash balance requirements, the statement said, which it will use to accelerate share buybacks.

PSA said it plans to use around €1.7 billion in cost savings from the merger to generate an operating margin of 2% by 2020, which Tavares said would improve to 6% by 2026.

European governments, particularly in Germany, where the bulk of Opel's 39,000 employees are located, responded cautiously to the merger.

"The agreements must be intensively studied, especially by the representatives of the workers," said Germany's Economy Minister Brigitte Zypries in a statement endorsed by three German states. "Transparency must be ensured in the process to come. It must be guaranteed that the European management of Opel/Vauxhall, the general works council and the European workers union of Opel/Vauxhall are fully included in further talks."

In the U.K., Business Secretary Greg Clark said the government "welcomes the assurance by PSA that they will respect the commitments made by GM to Vauxhall's employees and pensioners."

"We will continue to engage and work with PSA in the weeks and months ahead to ensure these assurances are kept and will build on the success of both sites for the long term," Clark said in a statement.