GM Agrees To Hedge Fund Activist’s $5 Billion Buy-back Plan

HWilsonNew York (HedgeCo.Net) – General Motors today agreed to a $5 billion share repurchase plan put forward by Harry Wilson, a former member of Obama’s Auto Industry Task Force. As part of the deal, Wilson agreed to give up his request for a board seat at GM.

Wilson joined the task force after retiring from a partnership at hedge fund Silver Point Capital at the age of 36. He also worked for Blackstone Group and Goldman Sachs previous to that.

GM’s approach will be to return all available free cash flow to shareholders while it maintains an investment-grade balance sheet underpinned by a target cash balance of $20 billion. GM also announced that its Board of Directors authorized the initial repurchase of $5 billion in GM shares to begin immediately and conclude before the end of 2016.

Reuters reports: “The agreement with Wilson ends two months of discussions in which he urged Chief Executive Officer Mary Barra to return money to shareholders and be more open about company performance targets. As part of the announcement, GM also said it’s investing in its business with a target of driving 20 percent returns on invested capital and will update shareholders on its progress every quarter.”

”As we continue to execute on our plan to become the most valued automotive company, our track record of improved operating performance, strong earnings momentum, and disciplined capital investments provide the foundation for a comprehensive capital allocation framework,” said GM CEO Mary Barra. “We will continue to invest in innovative technologies and world-class vehicles that will deliver sustained profitable growth and maximize returns to shareholders.”

GM reaffirmed that in 2015 it expects its total earnings before interest and tax (EBIT) adjusted and EBIT-adjusted margin to increase, compared to 2014, after adjusting 2014 for the impact of recall costs.

Alex Akesson
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