DealZone

Deals wrap: GM to file for IPO in August?

Government-rescued automaker General Motors plans to file its registration for an initial public offering during the week of August 16, according to a Reuters report that cited two people with direct knowledge of the preparations.

The public offering is seen as necessary for GM to reduce the government’s ownership in the company after it was forced to accept a $50-billion bailout last year.

The Reuters story puts the potential move in perspective:

“An IPO for the U.S. automaker, which was restructured in bankruptcy last year, would be the biggest U.S. stock offering since Visa Inc’s $19.7 billion March 2008 IPO and one of the biggest IPOs of all time.”

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Talk about odd timing. After guiding De Beers – the world’s biggest diamond producer – to first-half net earnings of $255 million, compared to just $3 million for the same period the previous year, CEO Gareth Penny announced his resignation. “I think you have to signal this quite openly to the market that you’re going to engage in this sort of process otherwise the rumor mills just start,” Penny told Reuters.

An analyst quoted in the Reuters story, said Penny’s sudden departure after 22 years with the firm may be due to De Beers being forced into a $1 billion rights issue last February after debt piled up and revenues dried up during the global downturn.

X-raying Xstrata

Xstrata is different from most other major mining companies. Rather than being a long established group with strong links to a particular country, such as Australia for Rio and BHP, South Africa for Anglo American, or Brazil for Vale, it is a relative upstart with few ties to any particular territory, aside from its tax inspired domicile, Switzerland.

The group’s culture might seem innocuous but it is important, particularly when Xstrata has this week proposed a “merger of equals” with South African stalwart Anglo American. Unlike many of its rivals, Xstrata’s raison d’etre is doing deals, led by raucous chief executive Mick Davis.

The company floated in March 2002 with an initial value of £2 billion. Since then, a number of transformational acquisitions such as the $19 billion purchase of Falconbridge, and the recovery in global commodity prices, has meant the group is now valued at £20 billion. At its record high last year, when it tried to buy platinum producer Lonmin, it was worth £67 billion.