General Motors Co. has agreed to buy back $3.2-billion (U.S.) worth of preferred shares owned by the United Auto Workers retiree trust in a deal that puts a value of about $432-million on similar shares held by the federal and Ontario governments.
The UAW trust holds 260 million preferred shares of GM, while the two Canadian governments hold 16 million.
The auto maker will pay $27 a share to purchase 120 million of the preferreds from the UAW trust.
The shares pay dividends of 9 per cent annually. The buyback will be financed in part by issuing five, 10 and 30-year unsecured notes, GM said Monday. The interest rate on the notes was not disclosed, but GM said it expects to record a third-quarter charge of $800-million as a result of the deal.
The federal and Ontario governments recently sold 30 million common shares of GM for about $1.1-billion.
That sale left them with about 110.1 million common shares.
The governments received the preferred and common shares in General Motors Co. in return for contributing about $10.8-billion (Canadian) to the bailout of the auto maker and its predecessor company, General Motors Corp.