November 14, 2010 in Nation/World

Chinese banks will play role in GM IPO

Sharon Silke Carty Associated Press
 
U.S. stake

GM’s stock offering on Thursday will reduce the U.S. Treasury’s stake in the company from 61 percent to 43 percent, and will help pay back the more than $50 billion that taxpayers invested in GM to keep it from collapsing. More stock offerings will happen in the next year or so, letting the government fully divest from the automaker.

DETROIT – Among the banks helping General Motors with its initial public stock offering this week are two identified by initials only: ICBC and CICC.

Americans uncomfortable with U.S. government ownership of General Motors may want to hear more: One of those banks is the Industrial and Commercial Bank of China, one of China’s four big central government banks. The other, China International Capital Corp., is a joint venture run primarily by Central Huijin Investment Ltd., an arm of the state, and Morgan Stanley.

This is the first time Chinese government banks have participated in a major U.S.-issued IPO, according to IPO tracking firm Dealogic. The banks are listed as co-managers in the offering, meaning they will sell a portion of the new shares.

Chinese automaker SAIC, GM’s partner in China, is finalizing plans to buy a roughly 1 percent stake, worth about $500 million, in GM’s IPO, the Wall Street Journal reported Friday. SAIC is owned by the Shanghai city government.

Other interested foreign investors include several sovereign wealth funds located in the Middle East and Asia. The Journal says those funds, which manage the finances of royal families and some nations, could invest $1 billion in GM’s IPO.

There could be political backlash for President Barack Obama, who has spent the past week in Asia addressing economic issues, like currency exchange differences between the U.S. and China. Obama has argued that China artificially deflates its currency, the yuan, in an attempt to make its exports cheaper.

“It’s a very political topic, but what Americans need to remember is that General Motors is an international company,” said Rebecca Lindland, an analyst with IHS Automotive. “If we want to get our money back, we need to understand that they have to do business on a global basis.”

The U.S. Treasury has been clear that international investors are welcome to invest in GM.

“We expect that a large and diverse group of institutional investors will be offered an opportunity to participate, with no single investor or group of investors receiving a disproportionate share or unusual treatment,” the Treasury said in a recent statement.

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