Canada’s multi-billion dollar General Motors stake sold

By | April 7, 2015
General motors

Canada decided to give up its remaining stake in General Motors Corp to Goldman Sachs & Co. The deal is considered to support the Conservative government’s pledge to balance the book ahead of the election.

General motors

On Monday, Canada GEN Investment Corp, a federal agency said the transaction involves the sale of 73.4 million shares and Canadian Government would no longer be entitled for any GM shares once the deal closes which is planned to happen on Friday. No financial term of the deal has been disclosed. The sale has happened through a so-called block trade, where the company buys the share with the intention of selling it to other institutional investors.

In New York trading on Monday, GM’s shares closed at $36.66, implying Ottawa will generate proceeds of about $2.69 billion. Canada said the sale proceeds from selling of the shares would be converted into Canadian currency by the government little by little over time. It has to be noted that Canadian dollar has weakened its value over time against the U.S Dollar in the past year.

As an aspect of a bailout package of the Detroit auto maker the Canadian and Ontario governments first obtain stakes in GM in 2009, however, they have been selling their positions to clear the deficits. Two years back, the federal Canadian government sold 30 million of its GM shares at $36.65 each on a total of more than $1.1 billion, while the province of Ontario earlier this year made cash on its position for $875 million.

Just in time to introduce 2015 budget plan on April 21 by the finance minister Joe Oliver, the Canadian government sells the remaining stake. The budget which was supposed to be out by March 31st was delayed to April. The finance minister said the government wanted more time to assess the fall and changes because of the fall in the crude oil price, says Canada’s top export.

In a statement emailed by Oliver, GM stock sales means the government “eliminated a market exposure for Canadian tax payers and returned GM to private sector ownership, having supported its continued contribution to the Canadian economy. We never believed the government should be a shareholder of a private sector company for an indefinite period of time.”

The statement did not reveal whether the sale was driven by issues caused by the crude and the capacity of the conservatives to present a balanced platform. The stock sale “does make the job a bit easier”for the government, said Douglas Porter, chief economist of BMO Capital Markets.