November 1, 2010 / 5:33 AM / 9 years ago

GM to sell over $13 billion of shares: sources

NEW YORK (Reuters) - General Motors plans to sell just over $13 billion of shares in its IPO, people familiar with the matter said, cutting the U.S. government’s stake while opening the door for investment by overseas state-backed investors.

GM will file the terms in an updated prospectus for its initial public offering with the U.S. Securities and Exchange Commission on Tuesday, the sources said.

The company expects to sell 365 million common shares at between $26 and $29 each, raising between $9.5 billion and $10.6 billion, they said.

In addition, GM plans to sell $3 billion of preferred shares that would convert to common shares under mandatory provisions.

GM, which emerged from bankruptcy in July 2009 with the U.S. Treasury as its majority shareholder, is likely to sell a combined $1.5 billion to $2 billion stake to four or five sovereign wealth funds, two of the sources said.

GM and the U.S. treasury have repeatedly declined to comment on the details of the IPO citing U.S. SEC regulations.

The IPO could value the entire company close to $60 billion, below the $67 billion needed if U.S. taxpayers are to break even on the common stock held by the Treasury, another source said.

By comparison, Ford Motor has a market capitalization of about $48 billion. Toyota Motor Corp has a market value of about $120 billion.

The sources declined to be named because the preparations for the IPO are not public. It was not immediately known by what ratio GM’s common stock would be split in advance of the IPO.

The Treasury, which holds a 60.8 percent stake in GM as a result of its $50 billion bailout, is prepared to take a loss on the initial sale of stock but hopes to break even over time as the stock appreciates, sources have said previously.

The GM IPO has long been expected to raise between $10 billion and $20 billion, making it one of the largest U.S. stock offerings ever. Visa Inc raised $19.7 billion in 2008 in the biggest U.S. IPO.

GM’s IPO would allow the U.S. Treasury to reduce its stake to 43.3 percent, excluding a likely overallotment option, two of the sources said.

If there is an overallotment, the IPO could raise another $1.5 billion, one source said.

(For graphic on how GM's IPO stacks up against the largest offerings globally, click r.reuters.com/mum92q)

EXECUTIVES HIT THE ROAD

The governments of Canada and Ontario are expected to sell down their combined stake to 9.6 percent from 11.7 percent and the UAW VEBA trust is expected to reduce its stake to 15 percent from 17.5 percent, the sources said.

GM is expected to begin its IPO roadshow on Wednesday. It is expected to price its IPO on November 17, and trading in the stock is expected to start on the New York and Toronto stock exchanges on November 18, the sources said.

The filing comes days after GM announced moves to strengthen its finances, including repaying $2.1 billion to U.S. taxpayers and making early payments to pension and retiree health plans.

GM will have two groups for the roadshow, whose stops will include New York, Boston and key financial centers in Europe, Asia and the Middle East, the sources said.

Chief Executive Dan Akerson plans to shuttle between the two groups, which will be led by top GM executives, one of the sources said.

During the roadshow, GM executives and their advisers are expected to emphasize the automaker’s strong position in China, the slowing pace of losses at its Opel unit in Europe, and its lowered break-even point in the U.S. market, sources have said.

GM Chief Financial Officer Chris Liddell, who is expected to be a key player in the roadshow, said in May that the automaker was set up to break even with industry-wide U.S. sales of about 11 million vehicles annually.

But cost-cutting progress by GM has reduced that threshold even further, a positive point the automaker will tout to investors, one source said previously.

U.S. auto sales are expected to rise to about 11.5 million vehicles this year from 10.4 million last year.

On Tuesday, automakers are scheduled to report U.S. sales for October, which are expected to show the strongest monthly sales of 2010.

The GM IPO has been closely watched both because of its expected scale and because of the involvement of the U.S. government.

Bankers representing GM met with sovereign wealth funds in Asia and the Middle East over in the first two weeks of October to make the case that the automaker has emerged from its bankruptcy as a leaner and more nimble competitor, sources told Reuters previously.

Reporting by Clare Baldwin and Soyoung Kim, additional reporting by Kevin Krolicki and David Bailey in Detroit and Philipp Halstrick in Frankfurt; editing by Andre Grenon, Ted Kerr and Carol Bishopric

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