GM's Whitacre Pushes Banks to Sell Cars, Not Just Shares in IPO
General Motors Co. CEO Ed Whitacre never misses the chance for a sales pitch.
When GM sought proposals in May to manage its initial public offering, it didn't want advice only on selling shares. The automaker wanted help selling Cadillacs and Corvettes. Banks were asked to consider using some of the underwriting fees to subsidize the purchase of GM cars by their employees, according to a two-page document obtained by Bloomberg.
Whitacre, 68, is squeezing concessions from banks vying for a role in what may be the second-biggest IPO in U.S. history. JPMorgan Chase & Co. and Morgan Stanley won the lead mandate in June and agreed to fees of 0.75 percent of the sale, a quarter of the usual rate for large stock sales, people with knowledge of the matter said last month.
“That's hardball,” said Joe Phillippi, principal of AutoTrends, a consulting firm in Short Hills, New Jersey. “After beating them down on fees they want another pound of flesh. It does sound a little unusual.”
Kristin Lemkau, a spokeswoman for JPMorgan, declined to comment. Mark Lake, a Morgan Stanley spokesman, didn't have an immediate comment. Randy Arickx, a GM spokesman, said he wasn't familiar with the request in the document and declined to comment.
Banks were asked to discuss “ideas as to how we can use the IPO to reposition GM and its vehicles within the investment community including your firm's willingness to reinvest any portion of any underwriting fees into the purchase of GM vehicles for your employees and/or company use.”
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