General Motors revealed plans to purchase 200 million GM shares from the U.S. Treasury for $5.5 billion, taking a major step to letting go of its image as the notorious “Government Motors.” GM’s sale is expected to close by December 31. The government will then own only around 300 million shares, to achieve a fully diluted stake of 19%.
Separately, the Treasury said that the federal government aims to let go of its total stake in GM in 12 to 15 months. GM is expected to pay $27.50 a share, which is 8% higher than $25.49, its closing price on Tuesday. According to GM CFO Dan Ammann, talks were held between GM and Treasury officials to establish the price. In a press briefing, Ammann described the sale as “very attractive” for the company and its shareholders.
He also said that the business will benefit since it erases the perception of the government being involved in the company. He added that over time, the sale will benefit sales and its customer base. A senior Treasury official told Reuters that GM made the first move to talk to Treasury officials after November’s U.S. presidential election.
However, GM was rejected when it made an offer to just pay the market value for the government's stock. Treasury then turned down GM’s second offer that had just a small premium. The Treasury official said that the company has always considered this as “balancing speed of exit with maximizing return.”
Treasury has invested $49.5 billion in GM as part of its U.S.-controlled bankruptcy in 2009. So far, Treasury has gotten around $28.6 billion back. The huge portions came from the $13.5 billion that the government got from GM's initial public offering in November 2010 and $6.7 billion from a loan that GM paid back in April 2010.