(By Balachander) General Motors Co. (NYSE: GM) will repurchase 200 million of its shares held by the U.S. Department of the Treasury for $5.5 billion, or $27.50 per share, a part of the government's plan to fully exit its entire holdings of GM stock within 12 to 15 months.
The repurchase price represents a premium of 7.9 percent over GM's previous closing price.
The auto giant said the deal will add to its earnings and the company expects to record a charge of roughly $400 million in the fourth quarter.
After the repurchase, Treasury will continue to own around 300 million GM shares, or roughly 19 percent. Treasury plans to start the sale of the remaining GM shares as soon as January 2013.
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Government ownership of GM stock was the result of the auto industry rescue that began under President George W. Bush in 2008 and which was expanded by President Barack Obama in 2009.
Since the rescue, GM has announced investments of more than $7.3 billion in the U.S. and created or retained more than 20,000 jobs.
"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," said GM CEO Dan Akerson.
Earlier this week, Treasury said it expects to make significant additional progress winding down TARP's bank programs in 2013. Treasury sold its final shares of AIG last week. Treasury has recovered more than $28.7 billion of its investment in GM to date through repayments, sales of stock, dividends, interest, and other income.
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Till date, Treasury has recovered more than 90 percent ($381 billion) of the $418 billion in funds disbursed for TARP.
"The government should not be in the business of owning stakes in private companies for an indefinite period of time," said Assistant Secretary for Financial Stability Timothy Massad. "Moving to exit our investment in GM within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."
GM shares jumped 7.5 percent in early trade on Wednesday to $27.41.