Chinese buyer backs out of deal to buy US car-maker’s iconic but failing brand.
|GM emerged from a government-financed restructuring under bankruptcy protection on July 10, 2009 [EPA]|
General Motors is gearing up for what could be the second-largest stock offering in US history, just two years after the automaker received a bailout from the government to save it from bankruptcy.
GM could raise up to $18.45bn in the initial public offering [IPO] expected on Thursday, marking a speedy comeback as it seeks to repay nearly $50bn taxpayer money and free itself of government control.
The company, which emerged from a government-financed restructuring under bankruptcy protection on July 10, 2009, increased its share price target range from $32-33 on Tuesday, an increase of as much as 27 per cent from the November 3 estimate of $26-29.
The Detroit-based carmaker also increased the size of its preferred shares offering from 60-80 million, which would translate into $3bn to $4bn.
Media speculation heated up ahead of the anticipated IPO with CNBC news reporting on Tuesday that it had confirmed GM would boost the size of the IPO by 30 per cent.
The move will increase the number of shares expected to price late on Wednesday to 478 million shares, putting the automaker on track to raising $22.4bn in total, the largest IPO in US history, CNBC said.
The increased share pricing “is a vote of confidence in the company and in the stock it is offering,” Michelle Krebs, senior analyst at Edmunds.com, said.
“It is a sign that the management of General Motors has done an extremely good job pitching the stock to investors and highlighting its positives over its challenges,” she told AFP news agency.
China eyes IPO
With the stock offer, GM’s new owners would include foreign investors, among them Chinese state-run firms.
The IPO has been backed by a host of large US and international banks, including Morgan Stanley, Bank of America, JPMorgan, Deutsche Bank and two Brazilian banks.
Yet two banks – the Industrial and Commercial Bank of China [ICBC] and China International Capital Corporation [CICC] – stand out as they signal the first time Chinese government-owned banks taking part in a major US IPO, the IPO tracking firm Dealogic said.
Chinese state media said Shanghai Automotive Industries Corp [SAIC], GM’s partner in China, will also buy a one per cent stake in GM to the tune of $500m.
The entry of Chinese companies may hit a raw nerve in Washington with increasing concern about Beijing’s massive holdings of US debt and a huge bilateral trade deficit.
Once the world’s largest corporation, GM sold more vehicles than any other automaker from 1931 through 2007, after which it lost the crown to Japan’s Toyota.
Hit by falling sales amid a steep US recession, GM was forced into the government-backed bankruptcy reorganisation after receiving billions in emergency aid.
The automaker transferred its main assets to a new government-supported car company under a plan financed by the US and Canadian governments.
The US government owns a 60.8 per cent stake in General Motors Company, the Canadian and Ontario governments have an 11.7 per cent holding, and the United Auto Workers union’s retiree health care trust fund owns a 19.93 per cent stake.
The embattled US auto industry has been showing consistent gains so far this year amid a US economic recovery that began in July 2009 from the worst recession since the 1930’s.