Canada to sell remaining 73.4 million shares in GM to Goldman Sachs

Article by Andrew Christian, on April 8, 2015

By April 10, the sale of Canada’s 73.4 million shares in General Motors to Goldman Sachs will be completed. Canada's federal government is entering this transaction in an unregistered block trade. The value of the GM shares is around $2.69 billion with the $36.66 closing price on Monday.

In a statement, Canada said that more information will be unveiled within the next several days when Canada GEN Investment Corp. (the entity that held the shares) files a report about this trade with securities regulators.

Canada's Minister of Finance Joe Oliver said that with this impending sale, Canadian taxpayers will no longer be exposed to market risks and GM will finally revert to being in the private sector after “having supported its continued contribution to the Canadian economy.” Oliver added that from the start, the government’s investment was always intended to be temporary.

GM had needed financing for its bankruptcy-court restructuring. The U.S. government was joined by Canada and Ontario in this endeavour. Last February, Ontario was able to sell its last GM shares. The U.S. was able to achieve this much earlier at just a little over a year ago. After the Canada sale, this leaves a UAW trust established to pay for union retirees' medical costs as GM’s largest shareholder with its 8.7% stake.

Joseph Phillippi, president of AutoTrends Consulting in Andover, N.J., described the trade as “a non-event” and “ceremonial,” explaining further that the proceeds don’t go to GM. When GM went into bankruptcy, Canada and Ontario took an equity stake of around 12% in order to safeguard the local jobs.

The share sale has been criticized by union officials who believe that this will mean that GM will become less committed to Ontario. Last February, GM spokeswoman Adria MacKenzie revealed that from 12,000 GM employees in Canada in 2008, that number has gone down to around 9,000.

However, she clarified that the present tally is “consistent” with the estimates that Canada and Ontario received in 2009. In a report to Congress in April 2014 by the special inspector general for the U.S. Troubled Asset Relief Program, it was revealed that in rescuing GM, the U.S. Treasury's bailout fund incurred a loss of $11.2 billion.

Notably, the U.S. made an investment of $49.5 billion in the bailout. In November 2010, CEO Dan Akerson led GM's initial public offering at $33 a share. With this move, GM was able to raise over $20 billion including preferred shares. In December 2013, its stock had a peak closing price of $41.53.

In the month that followed, GM became led by Mary Barra – the first female CEO ever for a global automaker. Barra was right away deluged with problems related to GM's long-delayed recall of defective small-car ignition switches that have been linked to 80 deaths.

GM recalled nearly 27 million vehicles for safety fixes in just the U.S., setting the record for the biggest recall announced by an automaker in one calendar year.

Before Canada made the announcement, GM shares increased by 0.4% to $36.66 last Monday in New York. These shares have climbed 5% this year through Monday after declining by 15% in 2014.

Topics: gm, canada, sales

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