GM to launch $5-bn share buyback
10 Mar 2015
General Motors said yesterday that it would launch a $5-billion share buyback in a bid to avoid a proxy war with investors.
GM said it reached a deal with an investor group that would avoid a proxy war over its governance and balance sheet in a deal that might see investors get more cash.
The deal would see investment group leader Harry Wilson stop his attempt to get a seat on the board, Reuters reported.
The company also confirmed it would raise its quarterly dividend to 36 cents a share, up from 30 cents a share, aligning with plans announced last month.
The actions taken together would return around $10 billion to shareholders through next year.
A number of investors had expressed their frustration with the company's approach, as its shares had remained near $33, the same price set at its post-bankruptcy IPO in 2010. In pre-market trading yesterday, CNBC reported that shares were up 2.6 per cent to $37.78.
The company had built up around $25 billion in cash, even as its sales and profits rebounded, since the company's 2009 government-led bankruptcy.
According to GM, it would now aim for $20 billion in cash on its balance sheet, while returning free cash flow beyond that level to shareholders.
The decision to launch the move comes after discussions between GM and an investment group led by Harry J Wilson.
The group was a member of the government task force that administered GM's $49-billion bailout in 2009.
The past month Wilson told GM's chief executive Mary T Barra that he was leading an effort by hedge fund investors in order to resolve the issue.
He added GM could easily afford to the acquisition of as much as $8 billion in stock without damaging its vehicle programmes and other projects.
In the event of GM turning down the offer Wilson would have been prepared to start a proxy fight to gain broader shareholder support for a buyback.
''I was very impressed at how Mary handled this and what it says about her general style and management approach,'' Wilson said in an interview yesterday.
According to Wilson, the buyback programme had obviated the need to gain a board seat in order to push an activist agenda.
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