U.S. Treasury Announces Plans To Exit General Motors

General Motors will repurchase 200 million, or 40 percent, of GM common stock held by the U.S. Department of Treasury for $5.5 billion, or $27.50 per share, the automaker announced this morning. The transaction, which will take place within weeks, is part of the Treasury’s program to fully exit holdings of GM stock within 12 to 15 months, based on market conditions.

After the completion of the repurchase, the Treasury will remain with roughly 300 million shares of GM common stock, or about 19 percent of the outstanding shares (on a fully diluted basis) compared to the 26 percent before the transaction. The Treasury will divest of the remaining 19 percent by various means in “an orderly fashion” beginning in 2013 — corresponding to a prearranged written trading plan, ending the government’s ownership position in The General.

As part of its exit, the Treasury will also relinquish certain governance rights included in the U.S. Treasury Secured Credit Agreement with GM. GM’s $27.50 repurchase price represents a 7.9 percent premium over the NYSE closing price on December 18, 2012, and GM will take a special item charge of $400 million in the fourth quarter of 2012.

Following the repurchase, GM’s balance sheet will remain strong — an objective that’s been a pillar to New GM’s financial strategy. In fact, it’s this strong balance sheet that has enabled GM to embark on the buyback program. The automaker estimates its liquidity to be $38 billion at the end of 2012 following the close of the share buyback plan.

“We come to work every day grateful that taxpayers from the US and Canada stepped forward to rescue our industry, and determined to show this extraordinary help was worth it,” said GM CEO Dan Akerson.