GM to sell 51 pct of GMAC to Cerberus group
NEW YORK (Reuters) – General Motors Corp. on Monday said it
had agreed to sell a 51 percent stake in its financing arm,
General Motors Acceptance Corp., to a consortium led by hedge
fund Cerberus Capital Management LP for $14 billion, payable
over three years.
The long awaited sale will generate much-needed cash for
the world’s largest automaker, which reported a $10.5 billion
loss in 2005. The move also help to restore the financing
unit’s credit rating to investment-grade status.
GM shares rose 3.5 percent in premarket trading.
The Cerberus-led investor group includes the private equity
unit of Citigroup and Japan’s Aozora Bank Ltd.
GM said GMAC will continue to be run by its existing
executive management following the deal, which is expected to
close in the fourth quarter of 2006.
The transaction includes $7.4 billion in cash from the
Cerberus-led consortium at closing and an estimated $2.7
billion cash distribution from GMAC related to the conversion
of most of GMAC and its U.S. subsidiaries to limited liability
companies, GM said.
In addition, GM will retain about $20 billion of GMAC
automotive lease and retail assets and associated funding with
an estimated net book value of $4 billion that will monetize
over three years, GM said.
GM said it will take a non-cash pre-tax charge to earnings
of approximately $1.1 billion to $1.3 billion in the second
quarter of 2006 associated with the GMAC stake sale.
Shares of GM rose to $22.03 on the Inet electronic
brokerage system from a close of $21.27 on the New York Stock
Exchange on Friday.