UAW Retiree Medical Benefit Trust will receive $1.78 billion in net proceeds from its March 30 public sale of all 362 million warrants it holds in Ford Motor Co., said Eric Henry, chief investment officer of the $44.4 billion VEBA fund.
The UAW trust, Ann Arbor, Mich., will place the proceeds temporarily in a Morgan Stanley Capital International All-Country World index fund and a Barclays Capital intermediate bond index fund, both currently managed by BlackRock, splitting the money evenly between the two funds, Mr. Henry said. It expects to receive the revenue next week.
The offering, conducted as a modified Dutch auction, resulted in a price of $5 per warrant, nearly 43% above the minimum required bid of $3.50.
“It was a booming success,” Mr. Henry said. “It was oversubscribed. We are happy to have the increased diversification” from selling the warrants, Mr. Henry added.
Samuel W. “Skip” Halpern, president of Independent Fiduciary Services, the UAW VEBA's independent fiduciary and discretionary manager of the trust's Ford securities, called the sale “a big win for the VEBA and its participants and beneficiaries.”
Each warrant represents the right to purchase a share of Ford's stock at $9.20. Ford stock closed at $12.57 a share. The warrants began trading today on the New York Stock Exchange under the ticker symbol FWS. The warrants closed today at $4.83 each.
The warrants represent about 11% of Ford's outstanding shares.
The UAW trust could determine a more permanent allocation for the proceeds by late April when it gives final approval to allocation targets for its entire fund, as a result of an asset allocation study by Ennis Knupp.
“We plan to transition (the entire fund) to the new targets over two or three years,” Mr. Henry said. “We don't want to make any sudden moves given our size.”
Ford contributed the warrants to the UAW VEBA on Dec. 31, in addition to $15 billion the company contributed in a combination of $13.2 billion in Ford notes and $1.8 billion in a portfolio of diversified investments. The contributions ended Ford's obligations to fund retiree medical benefits for its UAW-represented employees under a 2008 settlement agreement between the automaker and the UAW.
The Department of Labor's Employee Benefits Security Administration on March 24 issued an exemption allowing Ford to contribute the warrants and other company securities to the UAW VEBA in excess of the amount permitted from an employer under ERISA.