U.S. to Sell 40% of Its GM Stake As Part of Exit Plan

General Motors Co. will spend $5.5 billion to buy 200 million of its own shares from the U.S. Dept. of the Treasury, thus reducing the government's ownership to 19% from 26% of the company's total equity.

The company agreed to pay $27.50 per share, an 8% premium to Tuesday's closing price, for what amounts to 40% of the government-owned GM stock. The price falls short of the $33 per share the government received when it sold 412 million shares in the company's initial public offering in November 2010.

The Treasury Dept. says it intends to divest its remaining 300.1 million shares through "various means in an orderly fashion" over the next 12 to 15 months.

The government's plan is good news for GM management, which is eager to shed the "Government Motors" stigma and Treasury-imposed limits on executive pay and other perks. This week's deal will end a ban on executive use of private aircraft.

The transaction also cheered investors, who boosted GM shares to a six-month high of $27.18 by Wednesday's market close. The expected government sale of so many shares has weighed on the company's stock price.

GM plans to take a $400 million charge in the current quarter for the purchase, which is expected to close this month. After the cash payout, the company predicts it will end the year with about $38 billion in liquidity.

Following the latest share sale, Treasury Dept. will have recouped about $28.7 billion of its $49.5 billion bailout of GM in 2009. The U.S. would need to receive more than $69 per share to break even.