General Motors on Tuesday said it would sell its 7.9% stake in Isuzu Motors to Mitsubishi Corp, Itochu Corp and Mizuho Corporate Bank for about $US300m though the commercial partnership between GM and Isuzu will continue.
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GM currently holds 90.09m Isuzu shares.
In a statement, GM said the sale proceeds would be used “to support the North American turnaround plan, finance future growth initiatives, strengthen the balance sheet and fund other corporate priorities”.
GM has held an equity stake in Isuzu since 1971, when it purchased approximately 34%. Between 1971 and 1998, GM increased its stake to 49% from 34%. In 2002 as part of the Isuzu restructuring, GM cancelled shares related to its 49% stake and invested fresh capital of $500m primarily for the purchase of certain strategic commercial assets and for a new equity stake of 12% in Isuzu.
Between 2002 and 2005 GM’s stake in Isuzu was diluted from 12% to the current 7.9%, due to conversion of Isuzu’s convertible bonds.
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By GlobalDataOver the last 35 years, the companies have been involved in various joint projects in product development, advanced technology, global purchasing and supply chain management, and product distribution.
Projects that will continue are: midsize pickup truck assembly and distribution in Asia Pacific, Latin America, Africa, and the Middle East; development and manufacturing of diesel engines for passenger cars in Europe; development and manufacturing of diesel engines for full-size pickups in the United States; and commercial vehicle design, engineering and manufacturing.
GM will record the sale of the Isuzu stake in the second quarter. GM expects a pre-tax gain on the sale of approximately $300m as the investment was written down to zero in 2002.
The Associated Press (AP) said Mitsubishi, which has a joint venture with Isuzu to make and sell trucks in Thailand, is purchasing 40m shares at 16bn yen ($135m), raising its stake in Isuzu from 0.2% to 3.7%.
Itochu Corp., which has a partnership with both GM and Isuzu, is also purchasing 40m shares at 16bn yen, raising its stake to 4.2%, and Mizuho Corporate Bank, which works as Isuzu’s main bank, is acquiring 10m shares for 4bn yen ($34 million), the AP report added.
Shinji Kitayama, auto analyst with Shinko Securities Co. in Tokyo, told the news agency the shares were going to businesses that already had ties with Isuzu, and made sense.
AP noted that GM is divesting Japanese ties established in earlier decades. Earlier this month, GM sold 17% of Suzuki Motor for about $2 billion, leaving it with a 3% stake. That followed last year’s sale of GM’s entire 20% stake in Fuji Heavy Industries, the maker of Subaru cars.
General Motors is also raising cash by selling a 51% stake in its finance arm in a deal expected to generate $14bn.
