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US eyes selling rest of GM's stake
Source: Agencies |
December 20, 2012, Thursday
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THE US Treasury plans to sell its remaining stake in General Motors over the next 15 months, allowing the automaker to shed the stigma of being partly owned by the US government.
GM yesterday said it will spend US$5.5 billion to buy back 200 million shares from the Treasury by the end of this year. The government, in turn, plans to sell its remaining stake of 300 million shares on the open market over the next 12 to 15 months.
GM will pay US$27.50 for each share, about an 8 percent premium over Tuesday's closing price of US$25.49.
The deal almost certainly means the government will lose billions on a US$49.5 billion bailout that saved GM from being auctioned off in pieces during the financial crisis in 2008 and 2009. GM's buyback will cut the Treasury's stake to 19 percent from 26.5 percent. For it to break even, Treasury would have to sell the remaining 300 million shares for average of about US$70.
For GM, getting the government out of its business removes a major business obstacle. Chief Financial Officer Dan Ammann said GM has market research showing government ownership has curbed sales of the firm's cars and trucks.
"This is fundamentally good for the business," he said.
The government got its stake as part of the bailout of GM that began nearly four years ago.
Treasury said in a statement that it would sell the remaining 19 percent stake "in an orderly fashion" within the next 12 to 15 months, subject to market conditions.
Treasury said it will have recovered more than US$28.7 billion of its investment through repayments of loans, sales of stock, dividends, interest and other income after GM buys back the 200 million shares. But that leaves Treasury about US$21 billion short of recouping its investment.
In 2008 and 2009, the US government bailed out GM to help stabilize and restructure the company at the trough of the financial crisis.
GM yesterday said it will spend US$5.5 billion to buy back 200 million shares from the Treasury by the end of this year. The government, in turn, plans to sell its remaining stake of 300 million shares on the open market over the next 12 to 15 months.
GM will pay US$27.50 for each share, about an 8 percent premium over Tuesday's closing price of US$25.49.
The deal almost certainly means the government will lose billions on a US$49.5 billion bailout that saved GM from being auctioned off in pieces during the financial crisis in 2008 and 2009. GM's buyback will cut the Treasury's stake to 19 percent from 26.5 percent. For it to break even, Treasury would have to sell the remaining 300 million shares for average of about US$70.
For GM, getting the government out of its business removes a major business obstacle. Chief Financial Officer Dan Ammann said GM has market research showing government ownership has curbed sales of the firm's cars and trucks.
"This is fundamentally good for the business," he said.
The government got its stake as part of the bailout of GM that began nearly four years ago.
Treasury said in a statement that it would sell the remaining 19 percent stake "in an orderly fashion" within the next 12 to 15 months, subject to market conditions.
Treasury said it will have recovered more than US$28.7 billion of its investment through repayments of loans, sales of stock, dividends, interest and other income after GM buys back the 200 million shares. But that leaves Treasury about US$21 billion short of recouping its investment.
In 2008 and 2009, the US government bailed out GM to help stabilize and restructure the company at the trough of the financial crisis.
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