|English: Logo of General Motors Corporation. Source: 2007_business_choice_bro_en.pdf (on GM website). (Photo credit: Wikipedia)|
General Motors Co. said Monday it would launch a new, $5 billion share buyback in an agreement with dissident investors, and put forward a more detailed plan for capital allocation that promises investors the potential for further cash returns.
GM said it had reached a deal with an investor group that averts a proxy fight over its balance sheet and governance. As part of the agreement, investor Harry Wilson will drop his effort to get a seat on GM's board.
Wilson on Monday praised the company's capital plan, which offers investors a more transparent view of GM's cash investment proposals than previously disclosed.
GM also confirmed Monday it will boost its quarterly dividend to 36 cents a share from 30 cents previously. It had disclosed plans to raise its dividend last month.
In all, the actions should return about $10 billion to shareholders through 2016.
The auto maker outlined its plans for managing cash as part of a deal that averts a battle with an investor group that last month challenged its hoarding of cash in what the company called a “fortress balance sheet.”
Some investors had expressed frustration with that approach as GM shares traded in a range near $33 a share, the price set at its post-bankruptcy initial public offering in 2010. In premarket trading Monday, shares were up 2.6 percent at $37.78.
GM had built up roughly $25 billion in cash as its sales and profits rebounded following its 2009 government-led bankruptcy.
But from now on, GM said it would aim to keep $20 billion in cash on its balance sheet and return free cash flow beyond that to shareholders. The framework depends on GM maintaining an investment grade balance sheet.