General Motors is close to finalising a sale of equity to its long-time Chinese partner SAIC, according to Reuters news agency which cited people familiar with the matter.
The two carmakers are currently discussing how much of a stake SAIC would buy in GM. They have already agreed other issues such as technology sharing and SAIC’s ambitions to move beyond the China market.
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Any agreement between GM and SAIC would need Chinese government approval and so could still falter. Such a deal involving a sale of a stake in a company bailed out by US taxpayers in 2009 to a state-funded Chinese automaker will also face political scrutiny in Washington.
The US carmaker is set to price its roughly US$13bn IPO on 17 November and start trading the next day. The US Treasury, which owns 61% of GM’s common stock as a result of its US$50bn US taxpayer-funded bailout, is expected to cut its stake to slightly more than 40% in the IPO.
Executives and bankers are courting investors, including overseas sovereign wealth funds, which are expected to buy nearly US$2bn worth of shares, according to Reuters.
The potential investment in GM by China’s top automaker would expand their 13 year joint-venture in China, and their newly established relationship in India, to a broader global stage.
While selling shares to overseas state-backed investors such as SAIC could trigger a political backlash, GM’s advisers and underwriters have argued those investors could help provide long-term stability to the price of GM’s stock.
One of GM management’s key pitches for investors during the roadshow is the automaker’s strong position in China and other emerging markets.
GM and SAIC last week announced they would jointly develop more clean energy vehicles and components, including the development of a next-generation electric vehicle design.
In a sign of continuing progress in GM’s turnaround after bankruptcy restructuring, GM also posted a US$2bn third-quarter profit yesterday (10 November).
