Chinese Plan to Buy Stake in GM
NEW YORK — In a sign of the changing fortunes of the world's top two economies, China's biggest automaker, SAIC Motor Corp., is negotiating to acquire a stake of about 1 percent in General Motors Co. worth about $500 million, a person familiar with the matter told The Wall Street Journal.
The U.S. auto maker also is prepared to sell more than $1 billion worth of shares to sovereign wealth funds in the Middle East and Asia. Combined, the sales would give foreign investors roughly 16 percent of the shares to be sold next week under an initial public offering of stock, and give them a stake of some 4 percent in the Detroit auto maker. GM declined to comment on the investment talks.
The issue of overseas investors buying GM shares in the company's IPO has been a sensitive one for the U.S. government, which plans to reduce its 61 percent stake in the automaker to about 35 percent through the IPO.
The investment in GM by government-owned SAIC would be the latest in string of deals giving Chinese companies stakes in big-name Western companies. In 2007, sovereign wealth fund China Investment Corp. took an initial 9.9 percent stake in securities firm Morgan Stanley. Pacific Century Motors recently took over GM's former steering unit, now called Nexteer, and Shougang Corp. bought Delphi Corp.'s brake unit.
The U.S. Treasury has to walk a fine line. Attracting foreign investors will be a key to pulling off a listing of this size. But the Treasury has also had to weigh the possible political outcry if investors abroad are allowed to acquire a significant stake in GM, after U.S. taxpayers spent $50 billion to carry the company through bankruptcy reorganization, people familiar with the matter have said. The Canadian government also helped bail out GM, which has operations in Ontario.
GM's IPO allocations likely will include three or four sovereign wealth funds, in addition to SAIC, according to a person familiar with the situation.
The investments would represent the latest in a wave of capital infusions into U.S. companies that first gained momentum in 2007, when the credit crisis prompted U.S. banks and other companies to search abroad for capital. China Investment followed up its 2007 investment in Morgan Stanley with a $1.2 billion investment in 2009, according to Dealogic. The same fund also paid $3 billion in 2007 for a 10 percent stake in Blackstone Group LP.
Sovereign wealth funds, in particular, are attractive investors to GM and its bankers because they tend to hold investments long-term, providing stability for the company.
GM executives are in the midst of a "road show" to pitch the IPO to investors. The tour won't stop in the Middle East or Asia, but GM has worked to court investors in both places. GM Chief Executive Officer Daniel Akerson last month went to the Middle East to speak to potential investors, and Vice Chairman Stephen Girsky recently went to Korea, say people familiar with the situation. A final decision on the SAIC stake could come within a few days.
SAIC and GM are partners in a Chinese joint venture, started in 1997, that makes Buick, Cadillac and Chevrolet vehicles. The partnership has earned GM hundreds of millions of dollars over the years and has made GM the largest foreign auto maker in China. GM and SAIC also have a joint venture in India.
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