GM to buy $3.2B in stock from UAW VEBA

GM to buy $3.2B in stock from UAW VEBA
Mon, Sep 23

General Motors Expected To File Paperwork For IPOGeneral Motors Co. said Monday that it plans to buy 120 million shares of preferred stock from the UAW Retiree Medical Benefits Trust (UAW VEBA) at a cost of about $3.24 billion or $27.02 a share.

The Detroit-based automaker said the deal is contingent on GM closing an offer ofat least $3 billion in senior unsecured notes by Sept. 30, according to GM’s agreement with the VEBA filed with the U.S. Securities and Exchange Commission. GM, in the agreement, said it hopes to complete the transaction around the time of closing on the notes.

GM said it has launched an offering of senior unsecured notes in the bond market, proceeds of which will be used for general purposes including buying back shares from the UAW VEBA. GM said it plans to issue five-, 10-, and 30-year notes.

The UAW VEBAacquiredabout 260 million shares of GM preferred stock as part of the 2009 bailout of the automaker, while the Canadian government owns about 16 million shares of preferred GM stock. The VEBA’s8.4 percent ownership of GM with its 140 million common shares of stock doesn’t change with this transaction.

The move will allow the automaker to replace some high-cost debt with lower priced debt. GM now pays a 9 percent dividend on its preferred shares and is expected to get a much lower interest rate on the notes. The 9 percent dividend costs GM about $620 million annually.

GM can retire all of its preferred stock at the end of the next year and has indicated it plans to do so.

The automaker said it expects to take a charge of about $800 million in the third quarter associated with the repurchase of the shares.

The VEBA provides health

care benefits to nearly 800,000 UAW retirees and dependents. The VEBA said Monday that it confirms GM’s announcement, but has no comment regarding the pending transaction.

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