GM Said to Prepare IPO Plan With Treasury Selling 20%

General Motors Co. is preparing for an initial public offering that may sell 20 percent of the Treasury’s stake in the automaker and reduce the U.S. to a minority owner, said two people familiar with the plan.

The aim is to sell a fifth of the government’s 304 million shares, said the people, who asked not to be identified revealing private discussions. That would reduce the Treasury Department’s stake to less than 50 percent from 61 percent now. Final decisions on which owners will sell how many shares haven’t been made and may change, the people said.

A registration statement may be filed in August, aiming for a November stock sale, said four people familiar with the plan. The sale will probably raise $10 billion to $15 billion, depending on the company’s performance, the strength of the economy and the health of the IPO market, the people said.

An August filing means Detroit-based GM could have the IPO ready around the time of the Nov. 2 congressional elections, said the people. If Treasury can sell enough shares, President Barack Obama could help other Democrats running for office by arguing that his administration’s restructuring of GM is paying off, said Joe Phillippi, president of AutoTrends Consulting.

“The government wants a successful offering soon so they can say that they took the company through bankruptcy, turned it over to independent management and are taking it public,” said Phillippi, who is based in Short Hills, New Jersey. “This would be part of the campaign spin.”

Other Sellers

The automaker may also issue new shares to raise cash and sell shares owned by Canada and a union-led retiree health-care trust, one of the people said.

Selim Bingol, a GM spokesman, declined in an e-mail to comment on the matter.

GM has invited analysts, potential investors and representatives of its current shareholders to Detroit for a review of the business on June 29, said a spokeswoman, Renee Rashid-Merem. GM will also give the members of the financial community a look at current and future models, she said.

The IPO will be managed by JPMorgan Chase & Co. and Morgan Stanley, people familiar with the matter have said. They will collect fees of 0.75 percent of the sale, said a person briefed on the matter. Such fees would be a quarter of the usual rate for large stock sales.

JPMorgan had offered to accept payment in equity instead of cash, though that idea was rejected by GM and Treasury, two people said.

The U.S. will probably sell the remainder of its GM stock over “a few years,” Chief Financial Officer Chris Liddell said in a May 17 Bloomberg Television interview.

Equity Value

GM’s equity is worth $70 billion, according to a May 20 report by Eric Selle, a JPMorgan debt analyst who projects a return of 47 cents on the dollar for holders of bonds issued by GM’s predecessor, General Motors Corp., that will be converted to stock and warrants in new GM. At today’s bond prices, GM’s equity is worth about $51 billion.

Since 1999, four U.S. IPOs have exceeded $5 billion -- Visa Inc.’s $19.7 billion deal in 2008, AT&T Wireless Group’s $10.6 billion offering in 2000, Kraft Foods Inc.’s $8.68 billion deal in 2001 and United Parcel Service Inc.’s $5.47 billion sale in 1999, according to data compiled by Bloomberg.

The size of a company’s IPO may vary from the original amount listed in its registration statement, known as an S-1 filing, submitted to the Securities Exchange Commission.

The SEC examines the S-1, which companies use to register shares they want to sell, to make sure it complies with disclosure requirements and may ask for amendments to correct or clarify statements. A company can sell shares once the SEC declares the registration statement effective.

The process usually takes 8 to 10 weeks from the time of the initial S-1 filing to the effective date.

To contact the reporters on this story: David Welch in Southfield, Michigan, at dwelch12@bloomberg.net; Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net.

General Motors CEO Ed Whitacre said to be preparing an initial public offering. Photographer: Bill Pugliano/Getty Images