General Motors Co is expected to announce a share-buyback program on Monday in order to avoid an eventual proxy fight with activist investor Harry J. Wilson, who has been pushing for a seat on the carmakers board, the Wall Street Journal reported.
Although the exact size of the buyback remains unknown it is expected to be less than $8 billion, or the sum that Mr. Wilson has earlier proposed, the journal said citing people familiar with the matter.
In February Mr. Wilson, who has been displeased with GMs stock price, overall performance and especially its cash management, noted the company that he will nominate himself for a board seat during GMs annual shareholder meeting and suggest an $8 billion buyback program.
However, the sources said that the two parties have been negotiating for weeks now and have reached an agreement over the weekend, which would be disclosed in an announcement expected on Monday. The journal also said that GM plans to also unveil additional methods to deliver extra shareholder returns in the future.
The carmaker lifted its second-quarter dividend by 20% and unveiled plans to boost shareholder returns through the year in February, when the company released its fourth-quarter and full-year performance.
GM has amassed some $25 billion in free cash as it awaits for the Justice Departments decision about a possible large fine in relation to the companys failure to recall potentially dangerous vehicle, which have been linked to 50 death over the past ten years.
Although Mr. Wilson is the one leading the march, teamed up with four hedge funds, GM sees the move as a solutions for all of its shareholders who have demanded higher returns. Mr. Wilson and his backers collectively own more than 2% of GMs outstanding stock.
Mr. Wilson, who also helped the company to design its government bailout plan in 2008, own around 30 000 of GMs shares or close to $1.1 million, which ranks him third by share ownership within the 13-member board.
GM lost 2.84% on Friday and closed at $36.54 in New York, marking a one-year decrease of 2.7%. The company is valued at $59.33 billion. On Monday the stock edged up 1.66% in pre-market trading to $37.45.
According to the Financial Times, the 16 analysts offering 12-month price targets for General Motors have a median target of $43.00, with a high estimate of $51.00 and a low estimate of $28.00. The median estimate represents a 16.72% increase from the last closing price.
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