General Motors revealed this week that they are planning on purchasing 200 million shares of GM common stock currently held by the U.S. Department of the Treasury for an approximate $5.5 billion, or $27.50 per share.
The buyback is reportedly a part of the Treasury's plan to exit their entire holdings of GM stock according to a GM press release. They're looking to exit the holdings completely within the next year or so.
"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," said Dan Akerson, chairman and CEO of GM in the press release.
The Department of Treasury announced their decision this week and intends to sell the remaining shares of stock into the market through "various means and in an orderly fashion."
They will begin the process in January 2013, though they already have a pre-arranged written trading plan set. The Treasury has also agreed to release certain rights that were included in the U.S. Treasury Secured Credit Agreement made with GM according to the press release.
"A fortress balance sheet has been a pillar of GM's financial strategy and has enabled us to undertake today's actions," said Akerson in the release. "GM's balance sheet will remain very strong, with estimated liquidity of approximately $38 billion at the end of 2012, following the closing of the share buyback."
The $27.50 price per share represents 7.9 percent premium over the closing price on Dec. 18, and the buyback is expected to close by the end of 2012. With the share buyback, GM intends to take control of approximately $400 million in the fourth quarter.
The Treasury will continue to own around 300 million shares of GM stock, which equals around 19 percent of the company. Government ownerships of GM was necessary to help the company in business, a plan which started under President George W. Bush in 2008, and was expanded by President Barack Obama in 2009 according to GM.
Since bailing out GM, the company has reported investments of over $7.3 billion in the U.S. and was able to create or retain over 20,000 jobs.
"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," Akerson said in the press release.
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