GM Said to Aim for Up to $16 Billion in Stock Sale

Bloomberg

 

General Motors Co., the automaker 61 percent owned by the U.S., is seeking to raise $12 billion to $16 billion in an initial public offering, said a person familiar with the plan.

The more than 500-page document, called an S-1, is likely to be filed tomorrow, though it may not happen until Monday, said the person, who asked not to be named because the discussions are private. The exact value of the offering may not be fully detailed in the registration statement filed with the U.S. Securities and Exchange Commission, said the person.

The IPO would be the second-largest in U.S. history, behind Visa Inc.’s $19.7 billion initial offering in March 2008. The share sale is also the first step in freeing the Detroit-based automaker from government ownership, which Chief Executive Officer Ed Whitacre has pushed for after GM’s $50 billion taxpayer bailout in the wake of its bankruptcy in June 2009.

“After the restructuring, I expect GM to once again be a leading company on the U.S. stock market,” said Kim Yong Tae, who helps manage $2.9 billion equivalent of assets at Yurie Asset Management Co. in Seoul. “The U.S. government has shown a strong will to revive GM. It’s a stock I want to add to my portfolio.”

Credit Line

GM has obtained a $5 billion revolving line of credit from a group of at least 15 banks as of last night New York time, said the person. More than half are named in the draft of the document as underwriters, including Morgan Stanley, JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Credit Suisse Group AG.

Selim Bingol, a GM spokesman, declined to comment on details of the IPO.

“We will do an IPO when conditions are right for the company and in the markets,” he said in an e-mail.

GM today reported second-quarter net income of $1.54 billion on higher sales in the U.S. and China. Earnings before interest and taxes climbed to $2.03 billion from $1.82 in the first three months of the year, the company said in a statement. Revenue rose 44 percent from a year ago to $33.2 billion.

The company reported $1.07 billion in first-quarter profit in May, compared with a $5.98 billion loss a year earlier.

Most of the shares offered would come from the U.S. Treasury, the person said. The aim is to sell a fifth of the government’s 304 million shares, two people familiar with the plan said in June. That would reduce the Treasury’s holdings to less than 50 percent.

New Shares

The automaker may sell a small number of new shares, the person familiar with the plans said yesterday. The Canadian government, the United Auto Workers union’s retiree medical trust and the estate of the bankrupt predecessor General Motors Corp. haven’t decided whether to participate in the IPO, the person said.

The document will describe the old GM, its restructuring in bankruptcy and liabilities facing the new company, the person said.

GM will report its second quarter profit today, and industry analysts are looking for strong results to set the stage for the IPO even as consumer confidence wanes.

“GM needs to be very careful about when to conduct the IPO,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management in Tokyo. “Can they convince investors to buy shares when spending is dropping in the U.S. and they don’t have leading-edge environmental technology?”

Chevrolet Volt

The largest U.S. automaker will introduce its Chevrolet Volt electric-drive car later this year. The vehicle will compete with models including Nissan Motor Co.’s Leaf electric car and a planned plug-in version of Toyota Motor Corp.’s Prius hybrid.

General Motors Corp. filed for Chapter 11 bankruptcy protection on June 1, 2009, after posting $88 billion of losses since 2004, the last year the company reported an annual profit. General Motors Co. emerged 39 days later.

As GM prepares to sell stock, investors had two main questions. First is when GM can expect to break even on its European business. The unit lost $506 million before interest and taxes in the first quarter and doesn’t expect to break even until at least 2011.

The next question is the company’s succession plan. The company has not said who will lead GM after Whitacre, 68, retires.