The UAW Retiree Medical Benefit Trust, Ann Arbor, Mich., will receive $1.78 billion in net proceeds from its March 30 public sale of all the 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 temporarily will place the proceeds in a Morgan Stanley Capital International All-Country World index fund and a Barclays Capital intermediate bond index fund, both managed by BlackRock, splitting the money evenly between the two funds, he said.
The offering, conducted as a modified Dutch auction, resulted in a price of $5 per warrant, nearly 43% over the minimum required $3.50 bid.
“It was a booming success,” Mr. Henry said. “It was oversubscribed. We are happy to have the increased diversification” from the sale.
Samuel W. “Skip” Halpern, president of Independent Fiduciary Services, the UAW VEBA's independent fiduciary and discretionary manager of the trust's Ford securities, said, “This was 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 March 31 at $12.57 a share. The warrants began trading March 31 on the New York Stock Exchange under the ticker symbol FWS. At close of trading March 31, the warrants were priced 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 approvals to allocation targets for its entire fund resulting from an asset allocation study by Ennis Knupp & Associates, Chicago.
“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.”
IFS made the decision on selling the warrants and the timing of the sale, and on selecting Deutsche Bank Securities Inc. as the manager for the offering, Mr. Halpern said.
“The net proceeds are intended to help diversify the trust's overall investment program and support payment of benefits to its nearly 200,000 participants and beneficiaries associated with Ford,” according to an IFS statement.
IFS hired Sutter Securities Inc. as its financial adviser on the transaction and the law firm of Proskauer Rose LLP as legal counsel.
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. n