U.S. Says It Plans to Sell 30 Million More GM Shares

By Tim Higgins & Keith Naughton - Jun 5, 2013 6:51 AM PT


The U.S. Treasury Department said it plans to sell 30 million additional shares of General Motors Co. common stock in an 50-million-share offering that will also include a sale by the UAW union’s GM retiree health-care trust.
The offering coincides with the automaker’s inclusion in the Standard & Poor’s 500 Index as of the close of trading tomorrow, the Treasury said in a statement today. The U.S. said in December that it would sell its remaining GM stake in 12 to 15 months. Treasury didn’t revise that timing today.

Jeff Kowalsky/Bloomberg

The U.S. Treasury Department said it plans to sell 30 million additional shares of General Motors Co. common stock in an offering that will also include 20 million shares from the UAW union’s GM retiree health-care trust.



The U.S. Treasury Department said it plans to sell 30 million additional shares of General Motors Co. common stock in an offering that will also include 20 million shares from the UAW union’s GM retiree health-care trust. Photographer: Jeff Kowalsky/Bloomberg



The largest U.S. automaker, based in Detroit, is replacing H.J. Heinz Co., which will be purchased by Warren Buffett’s Berkshire Hathaway Inc. and other investors. Berkshire Hathaway is also an investor in GM, which had been in the S&P 500 since the index was established in 1957 until its 2009 bankruptcy.
“The stock is doing well right now, so this is opportune,” said Michelle Krebs, an analyst with automotive researcher Edmunds.com, who is based on Royal Oak, Michigan. “Getting back into the S&P 500 is an important milestone. But the real celebration is the day the government is totally out of the business.”
GM fell 0.1 percent to $34.92 at 9:47 a.m. New York time. The shares gained 21 percent this year through yesterday, compared with a 14 percent increase for the Standard & Poor’s 500 Index. This year’s surge lifted GM past its $33 initial public offering price in November 2010.
‘Government Motors’

“We appreciate the opportunity to assist in this offering made possible by our rejoining the S&P 500,” GM Chief Financial Officer Dan Ammann said in a statement. “Our focus remains on continuing the progress we are making in the marketplace.”
The U.S. invested $49.5 billion in GM, the biggest piece of an industry bailout that became a centerpiece in the first term of President Barack Obama. Critics of the bailout labeled GM “Government Motors.”
“GM is always going to be tainted with, ‘They took the money,’” Krebs said. “I’m not convinced it’s going to make a lot difference in the minds of car-buying consumers.”
The U.S. owned 241.7 million shares in GM, or 16.4 percent, as of April 1, according to the automaker’s proxy statement.
The U.S. sale of additional GM shares opens the door for GM to restore its dividend, Joseph Spak, an analyst with RBC Capital Markets, wrote in a note to investors today.
Analyst’s View

“The accelerated sell-down by the government should be viewed positively,” wrote Spak, who is based in New York. The government could exit GM “by the end of the year. This could open the door for additional capital actions, including a potential dividend.”
Selling 20 million shares is the retiree health-care trust, created following 2007 contract negotiations between GM and the Detroit-based United Auto Workers union.
The trust, which assumed responsibility for medical cost of union retirees, is the No. 2 shareholder behind the U.S. with 160.1 million shares, according to data compiled by Bloomberg.
Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley are acting as the joint book-running managers of the proposed offering, the Treasury said.
To contact the reporters on this story: Tim Higgins in Detroit at thiggins21@bloomberg.net; Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net
To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net
http://www.bloomberg.com/news/2013-06-05/u-s-treasury-says-it-intends-to-sell-30-million-more-gm-shares.html