REFILE-GM investors to focus on buybacks, dividend after Treasury exit

Mon Nov 25, 2013 2:52pm EST
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By Ben Klayman

DETROIT Nov 25 (Reuters) - General Motors Co investors are focused on the possibility of stock buybacks or a dividend on common shares now that the U.S government has outlined its plans to sell the rest of its stake in the No. 1 U.S. automaker by year end, analysts said.

Analysts expect GM next year to buy the rest of its Series A preferred stock owned by the United Auto Workers healthcare trust and the Canadian government, and then return cash to shareholders through a buyback and dividend that will draw more interest from potential investors.

"The likely clean-up of the Treasury stake by year end moves capital allocation to the forefront for 2014," Barclays' analyst Brian Johnson said in a research note.

The U.S. Treasury said it would exit its stake in GM by year end, a move many on Wall Street had expected despite prior announcements that it would sell the rest of its shares by April 2014.

Analysts said Treasury's exit will remove the stigma of the nickname "Government Motors" that executives said has hurt GM sales slightly. It also will eliminate the compensation cap put in place after the $49.5 billion U.S. bailout in 2009, allowing GM to pay market rates to retain and attract top talent.

With about $37 billion in total automotive liquidity, GM has cash to go in several different directions, although executives have repeatedly stressed that it will focus on investing first in its operations.

"The priorities for cash reinvestment haven't changed," GM Chief Financial Officer Dan Ammann told analysts on the company's earnings conference call late last month. "We're obviously focused on reinvesting in the business, making sure we have a winning product portfolio going forward."   Continued...