Canada Sells Remaining Stake in General Motors
Canada agreed to sell its remaining stake in General Motors Co. to Goldman’s Sachs for an undisclosed amount—a deal that helps bolster the Conservative government’s pledge to balance the books before elections.
Canada GEN Investment Corp., a federal agency on Monday said the transactions involve the sales of 73.4 million shares, and as a result the Canadian government will no longer hold any GM shares once the deal closes the Friday. No termss were disclosed. The sale is through so-called block trade, in which case Goldman buy’s the shares with a plan to sell them to institutional investors.
In New York trading Monday, GM’s shares settled at $36.66, suggesting Ottawa will generate proceeds of about $2.69 billion. Canada said the sale proceeds would be converted by the government into Canadian currency “gradually over a period of time.” The Canadian dollar had weakened markedly against the U.S. dollar over the past years.
The Canadian and Ontario governments first acquired stakes in GM in 2009 as part of a bailout package of the Detroit auto maker, but had been selling their positions recently to whittle down deficits. In (September 2013) the federal Canadian government sold 30 million of its GM shares at $36.65 each for more than $1.1 billion, while the provinces of Ontario earlier this year cashed out its position for about $875 million.
The sale of the Canadian government’s remaining stake comes as Finance Minister Joe Oliver plans to introduce the 2015 budget plan on April 21. The budget release was delayed, as it generally introduced before the end of the fiscal year on March 31. Mr. Oliver said that the government required more time to assess the fallout from the decline in the price of crude oil, Canadian’s top export.
According to the government fall economic update introduced in early stages of crude’s price drop, Canada forecast’s a budget surplus in the current fiscal year, which beganed on April 1, of 1.9 billion Canadian dollars ($1.5 billion). Even amid the crude swoon, the Conservative government had vowed it would record a budget surplus in 2015-2016, or just in the time for an election in the fall at which time the Conservatives will seek a fourth straight mandate.
In an emailed statement, Mr. Oliver said the GM stock sale means the government “eliminated a market exposure for Canadian taxpayers and returned GM to private sector ownership, having supported its continued contribution to the Canadian economy…. We never believed that the government should be a shareholder of a private sector company for an indefinite period of time.”
The statement didn’t address whether the sale was spurred by concerns over the crude swoon and the ability of the Conservatives to deliver a balanced budget, which had been one of the main centerpieces of its coming re-election platform. The stock sale “does make the job a bit easier” for the government said the Douglas Porter, chief economist at BMO Capital Markets.
Prime Minister Stephen Harper said last month the Canadian government would record a budget deficit of just over C$2 billion for the fiscal year just ended, on March 31. The Conservative records a budget deficit of roughly C$56 billion at the height of the global financial crisis, in 2009 due to the low tax revenue and infrastructure spending meant to mitigate the fallout from the worst financial downturn since the Great Depression.
The reduction in deficit, toward’s a goal of balance, has been achieved through improved economic growth and an annual austerity program that achieved savings of over C$5 billion from the public sector.