Vauxhall and its continental sister brand Opel will become part of the same company as Peugeot and Citroen, the company confirmed today.
The deal, worth a total of £1.9bn, is expected to be completed by the end of 2017, and will see the PSA Group become Europe's second-largest car manufacturer, with a 17 per cent market share.
This will also end General Motors' 92-year-long ownership of the Vauxhall brand, which has struggled for profitability in recent years.
PSA and Vauxhall/Opel have worked closely together in the past on multiple projects, and PSA claims this has created "substantial synergies between the two groups".
Carlos Tavares, chairman of PSA, said: "We are proud to join forces with Opel/Vauxhall and are deeply committed to continuing to develop this great company and accelerating its turnaround.
The news, however, may be concerning for Vauxhall's 35,000 UK employees, who may fear job losses as a result of the merger.
Neither company offered any solid reassurances in their official statements, although Tavares said PSA would be "respecting the commitments made by GM to the Opel/Vauxhall employees".