LONDON - From ketchup to hot drinks, family-run investment firms are shaking up the consumer deals market, squeezing out private equity players and forcing them to change strategy.
BEIJING/HONG KONG - China reiterated its opposition on Thursday to a European Union plan to limit airline carbon dioxide emissions and called for talks to resolve the issue a day after its major airlines refused to pay any carbon costs under the new law.
GM IPO raises $20.1 billion
NEW YORK |
NEW YORK (Reuters) - General Motors Co GM.UL pulled off the biggest initial public offering in U.S. history on Wednesday, raising $20.1 billion after pricing shares at the top of the proposed range in response to huge investor demand.
GM sold 478 million common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares, more than the initially planned $4 billion.
Including an option that would allow underwriters to sell more shares, expected to be exercised in coming days, GM looks set to raise $23.1 billion -- the biggest initial public offering ever.
The strong response to the stock sale reflects growing investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy in June 2009 with sharply lower costs and higher profit potential.
The U.S. government's stake in GM will drop to about 33 percent from 61 percent if all available shares are sold.
The stock will begin trading on Thursday on the New York and Toronto stock exchanges.
The success of the IPO is good news for the Obama administration, which faced criticism for bailing out GM, and will help the automaker shed its "Government Motors" label.
Auto industry executives and analysts said the reversal in Wall Street sentiment toward GM pointed to renewed confidence in an industry that was hit hard by the credit crisis of 2008.
That is a positive sign for a range of auto-related companies, including Chrysler, that are looking to tap the credit and equity markets in coming months, analysts said.
"You're not in GM for a three-month investment," Tim Leuliette, a director at auto parts maker Visteon Corp, VSTO.OB said at the Reuters Autos Summit.
"You're into GM because a critical element, a critical building block of the U.S. economy, has significantly repositioned itself to be competitive.
FROM BLUE-CHIP TO BAILOUT
The stock sale represents a big step toward taxpayers recouping the U.S. government's $50 billion rescue of the 102-year-old company, which had fallen from blue-chip status to bailout basket case in recent years.
GM earned $5 billion in the first nine months of 2010 and is on track for its first full-year profit since 2004. Earnings will accelerate if U.S. auto sales continue to creep back up toward the 15-million or 16-million vehicle-per-year sales rates the U.S. industry last saw in 2007, analysts say.
Sales plunged to 10.4 million vehicles in 2009 and have staged a slow recovery to near 11.5 million this year.
"GM is making a lot of money at depression levels of sales. As the market improves it should make even more money," said Dave Cole, chairman emeritus of the Center for Automotive Research.
In a road show for investors spearheaded by GM Chief Executive Dan Akerson and Chief Financial Officer Chris Liddell, the automaker has emphasized both its sharply lower costs and its exposure to key growth markets like China.
One of the open questions was whether GM's China partner, state-owned SAIC Motor Corp Ltd (600104.SS), was able to move beyond a last-minute regulatory hurdle that threatened its plans to take a 1 percent stake in GM.
The two companies had negotiated new cooperation in areas such as electric car programs in talks that began this summer.
Under a tentative deal, SAIC had agreed to invest $500 million to $1 billion in GM pending Chinese government approval, people with knowledge of those discussions said.
As of late on Wednesday, China's Ministry of Commerce had not approved the SAIC investment, said three people familiar with the matter.
Sources have said that sovereign wealth funds in the Middle East and Asia are among the investors.
GOVERNMENT TO REMAIN BIGGEST OWNER
The U.S. Treasury will remain GM's largest shareholder for now. U.S. officials have said unloading the entire stake is likely to take several years.
The stock price will need to rise by 47 percent to $48.58 -- about what it costs to fill the gasoline tank of a 2010 Chevy Malibu LS 4-door sedan -- for the U.S. government to break even on its follow-on stock sales.
At $48 per share, GM would have a market value of more than $90 billion. In comparison, its closest rival, Ford Motor Co (F.N), has a market capitalization of $59 billion after a rally that has sent its stock up 65 percent this year.
Government officials have argued that it would represent a kind of success if the White House breaks even only on the $30 billion that the Obama adminstration committed to GM. Just over $19 billion in funding came from the Bush administration.
The GM bailout spared the automaker from liquidation and saved hundreds of thousands of manufacturing jobs at the company and its suppliers, officials have said.
The governments of Canada and Ontario also took a combined stake of 11.67 percent stake in GM in return for helping to fund the bailout, and they reduced their stakes through the IPO.
With over-allotments, GM's IPO would eclipse the record $22.1 billion raised by Agricultural Bank of China (601288.SS) in its IPO in July.
(Reporting by Kevin Krolicki in Detroit and Clare Baldwin and Soyoung Kim in New York; additional reporting by James Kelleher in Detroit and John Crawley in Washington; Editing by John Wallace, Matthew Lewis and Ted Kerr)
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