With U.S. Treasury Exiting, GM (GM) Becomes Prime Activist Target
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Will General Motors (NYSE: GM) get the 'Icahn Treatment' soon?
Following the U.S. Treasury moving to sell the balance of its 31.1-million-share stake in GM, the company's cash-rich balance sheet might draw the attention of activist investors. Bloomberg cited comments from former U.S. auto task force member and Maeva Group advisor Harry Wilson on the speculation.
Wilson noted that company's which aren't running an efficient shop will attract activist attention. Along with GM having a large cash pile, the company is also generating more and more cash each year. Bloomberg has GM generating about $5.4 billion of free cash flow (FCF) in 2014, about double that of 2013.
GM isn't expensive either; the company's current enterprise value of $42.3 billion makes it cheaper than 97 percent of its peers.
Other than Icahn -- who made a run at GM in 2000 -- other notable auto activists include Cerberus Capital and Kirk Kerkorian.
With corporations being more cash-heavy than ever, activists are becoming more bold. Icahn, for instance, is pressuring Apple (Nasdaq: AAPL) to return most, if not all, of its massive $150 billion-plus offshore cash to investors. He has reported holding at least two meetings with CEO Tim Cook in the last few months, though Cook has averred that Apple will not change its capital allocation strategy in 2013.
Apple has a market cap of over $475 billion, making GM's $52 billion seem small in comparison.
What about obligations? One Barclays analyst recently noted that GM will be able to buy back the Canadian government's $4.1 billion stake next year, the $5.3 billion UAW health-care trust stake in 2015, and still have enough for a 40 cent annual dividend.
GM has $33.7 billion in unfunded pension obligations and current CEO Dan Akerson has called for a CapEx plan of $8 billion annually.
But, analysts also see GM in a better position now than before the 2008 - 09 financial crisis. The company is a leaner, more-efficient machine now, better able to withstand another downturn in the economy.
Shares of GM are down 0.3 percent Tuesday.
Following the U.S. Treasury moving to sell the balance of its 31.1-million-share stake in GM, the company's cash-rich balance sheet might draw the attention of activist investors. Bloomberg cited comments from former U.S. auto task force member and Maeva Group advisor Harry Wilson on the speculation.
Wilson noted that company's which aren't running an efficient shop will attract activist attention. Along with GM having a large cash pile, the company is also generating more and more cash each year. Bloomberg has GM generating about $5.4 billion of free cash flow (FCF) in 2014, about double that of 2013.
GM isn't expensive either; the company's current enterprise value of $42.3 billion makes it cheaper than 97 percent of its peers.
Other than Icahn -- who made a run at GM in 2000 -- other notable auto activists include Cerberus Capital and Kirk Kerkorian.
With corporations being more cash-heavy than ever, activists are becoming more bold. Icahn, for instance, is pressuring Apple (Nasdaq: AAPL) to return most, if not all, of its massive $150 billion-plus offshore cash to investors. He has reported holding at least two meetings with CEO Tim Cook in the last few months, though Cook has averred that Apple will not change its capital allocation strategy in 2013.
Apple has a market cap of over $475 billion, making GM's $52 billion seem small in comparison.
What about obligations? One Barclays analyst recently noted that GM will be able to buy back the Canadian government's $4.1 billion stake next year, the $5.3 billion UAW health-care trust stake in 2015, and still have enough for a 40 cent annual dividend.
GM has $33.7 billion in unfunded pension obligations and current CEO Dan Akerson has called for a CapEx plan of $8 billion annually.
But, analysts also see GM in a better position now than before the 2008 - 09 financial crisis. The company is a leaner, more-efficient machine now, better able to withstand another downturn in the economy.
Shares of GM are down 0.3 percent Tuesday.
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