) -- People who call
(GM - Get Report)
"Government Motors" are going to have to find another laugh line.
The automaker said Wednesday it will buy 200 million shares of common stock held by the U.S. Treasury for $5.5 billion, or $27.50 a share. The share buyback is part of the Treasury's plan, also announced Tuesday, to sell off its entire holdings of GM stock within 12 to 15 months, subject to market conditions.
The repurchase price of $27.50 a share represents a 7.9% premium over Tuesday's closing price of $25.49. The share buyback is expected to close by the end of the year. The transaction will be accretive to earnings, as GM's total number of diluted shares outstanding will be reduced by about 11%, the automaker said.
In premarket trading Wedneday, GM shares were up $2.37 to $27.86.
In association with the share buyback, GM will also take a charge of abouty $400 million in the fourth quarter, which will be treated as a special item.
The Treasury said it will begin its disposition of its remaining shares as soon as January 2013 and will relinquish governance rights that were included in its secured credit agreement with GM. After the repurchase, the Treasury will continue to own about 300 million common shares of GM, or 19% of outstanding shares.
"This announcement is an important step in bringing closure to the successful auto industry rescue," said GM CEO Dan Akerson, in a prepared statement. "It further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future."
"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.
Chief Financial Officer Dan Ammann said GM will retain "a fortress balance sheet" with estimated liquidity of about $38 million at the end of 2012, following the closing of the share buyback.
-- Written by Ted Reed in Charlotte, N.C.
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