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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) October 6, 1997
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GENERAL MOTORS CORPORATION
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-143 38-0572515
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
100 Renaissance Center, Detroit, Michigan 48243-7301
3044 West Grand Boulevard, Detroit, Michigan 48202-3091
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313)-556-5000
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ITEM 5. OTHER EVENTS
(a) On October 6, 1997, General Motors Corporation issued the
following news release on the subject of the Hughes transactions:
GM Board approves terms of Hughes transactions
DETROIT -- The General Motors Corporation (NYSE:GM, GMH) Board of Directors
today approved final terms of a series of related strategic transactions
involving the company's Hughes Electronics subsidiary.
"These transactions address strategic challenges facing the three principal
businesses of Hughes Electronics, and unlock stockholder value at GM," said GM
Chairman, Chief Executive Officer and President John F. Smith, Jr.
"We've done a lot of work to move these transactions forward," he said. "Our
objective was to reposition and strengthen certain GM business units in a way
that would benefit our stockholders."
GM expects to mail to its common stockholders a solicitation
statement/prospectus, which contains complete information on the transactions,
in early November. The transactions could be closed before the end of the year.
The following transactions were approved by the GM Board of Directors:
The spin-off of the defense electronics business of Hughes Electronics, known
as Hughes Defense, to GM common stockholders. Holders of GM $1-2/3 and Class H
common stocks would receive a distribution of all of the Class A common stock of
Hughes Defense. The stock to be distributed would have a total value of
approximately $6.2 billion. Also, proceeds of about $3.9 billion from new debt
to be incurred by Hughes Defense just prior to the spin-off would be allocated
to Hughes Electronics. Hughes Defense would then merge with Raytheon Company in
a transaction with an estimated value of $10.1 billion. Current Raytheon
stockholders would receive all of the Class B common stock of the merged
company.
The transfer of Delco Electronics, GM's automotive electronics business, from
Hughes Electronics to General Motors. The current 25.6 percent tracking-stock
interest in the earnings of Delco Electronics currently held by Class H common
stockholders will be transferred to holders of GM $1-2/3 common stock. To
compensate for the transfer of Delco, GM Class H common stockholders would
receive additional shares of Hughes Defense Class A stock. Delco would be
integrated into GM's Delphi Automotive Systems. The combination of Delco with
Delphi would better position these businesses to participate in the component
industry trend toward integrated automotive systems.
The recapitalization of GM Class H common stock into a new class of GM common
stock. The new stock would represent an approximate 25.6 percent tracking-stock
interest in the telecommunications and space business of Hughes Electronics.
Hughes Electronics would remain a wholly owned subsidiary of GM. These
transactions will enhance the growth potential of Hughes Electronics in the
expanding global telecommunications market through an additional $3.9 billion in
capital funding and the dedicated attention of senior management.
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All of the values described in this press release are estimates based on a
Raytheon stock price of approximately $60 ($59-15/16 on Oct. 3, 1997). These
values would be altered by any change in the market price of Raytheon stock
between now and the effective date of the merger.
Defense spin-off and merger
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The principal reason GM is proposing these transactions at this time is to
allow Hughes Defense to merge with Raytheon so that the newly combined company
will be able to compete more effectively in the U.S. defense industry where
significant consolidation has been occurring. Both classes of GM stockholders
would be able to participate in the benefits of the spin-off and merger because
they will receive a tax-free distribution of stock in Hughes Defense, which will
then merge with Raytheon.
The total value of the spin-off and merger to GM and its common stockholders
is estimated to be $10.1 billion. The value of this transaction is comprised of
the following two components:
The value of the Class A common stock of Hughes Defense to be distributed to
GM stockholders in the spin-off, which is estimated to be approximately $6.2
billion;
The total amount of new debt to be incurred by Hughes Defense just prior to
its spin-off, which is estimated to be $3.9 billion. GM would use the proceeds
of this new debt to fund Hughes Electronics' telecommunications and space
business.
Distribution ratio
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GM will allocate the Class A stock of Hughes Defense between its two classes
of common stockholders using a "distribution ratio." The GM Board of Directors
today approved the formula to be used to determine this distribution ratio, and
concluded that the Hughes transactions are fair to, and in the best interests
of, holders of both classes of GM common stock. GM would distribute a total of
approximately 103 million shares of Class A common stock of Hughes Defense,
which will represent about 30 percent of the total equity of the combined Hughes
Defense/Raytheon company, to its GM $1-2/3 and Class H common stockholders if
they approve the transactions.
The distribution to GM Class H common stockholders will account for their
tracking stock interest (currently about 25.6 percent) in Hughes Defense, plus
an additional amount valued at approximately $1.664 billion to compensate for
the elimination of their tracking stock interest in Delco Electronics and other
factors. The GM board has determined that the total value of Delco Electronics
and "other factors" related to this transaction is $6.5 billion -- of which
$1.664 billion represents the Class H stockholder's 25.6 percent tracking-stock
interest. GM $1-2/3 common stockholders would receive the remaining shares of
Class A stock.
The final distribution ratio must be determined at a later date because one
component of the formula is the 30-day average closing market price of Raytheon
common stock just prior to the effective date of the merger. The approximate
distribution of Hughes Defense Class A common stock to GM common stockholders,
using a Raytheon stock price of $60 per share for illustrative purposes only, is
as follows:
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GM Class H common stockholders would receive 54 million shares of Class A
common stock of Hughes Defense, or approximately 52 percent of the total number
of Class A common stock shares. GM $1-2/3 stockholders would receive 49 million
shares, or approximately 48 percent of the total number of Class A shares. The
approximate per-share dollar amounts of the distributions are $31.63 to holders
of GM Class H common stock, and $4.12 to holders of GM $1-2/3 stock.
New GM Class H common stock
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GM's Class H common stock would be recapitalized into a "New GM Class H"
common stock on a one-for-one share basis. The new stock would represent an
approximate 25.6 percent tracking-stock interest in the telecommunications and
space business of Hughes Electronics, and will be traded on the New York Stock
Exchange under the symbol "GMH". The characteristics of GM's proposed New Class
H common stock are fully described in the prospectus.
"The telecommunications and space industry presents significant growth
opportunities for Hughes Electronics," said Hughes Electronics Chairman C.
Michael Armstrong. "The industry is experiencing a period of rapid expansion and
change, providing many opportunities for strategic growth as well as vigorous
competition. Our strategy in telecommunications is to focus Hughes' strengths in
satellite technology in order to secure a leadership position in the emerging
telecommunications products and services area."
Armstrong added that because this growth strategy will require significant
capital, Hughes Electronics would receive about $3.9 billion in new funds from
the proceeds of the transactions proposed. In addition, it is expected that
future earnings at Hughes Electronics would be retained for the development of
the business; accordingly, no cash dividends are anticipated initially on the
new Class H stock.
"GM remains committed to supporting the Hughes telecommunications and space
business to ensure that it achieves its strong growth potential," said GM
Chairman Smith. "Through Hughes, GM is in a position to participate in the long-
term growth of this dynamic business."
Holders of the new GM Class H common stock will be offered the opportunity
for "book-entry ownership," through a direct registration system, which allows
stock ownership without certificates. Book-entry ownership is expected to
provide benefits to stockholders, as well as to GM. By implementing book-entry,
GM's transfer agent will be able to process stock transfers and sales
electronically and reduce costs associated with the issuance and delivery of
physical certificates.
Automotive Electronics
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The integration of Delco's automotive electronics capability with Delphi's
systems and components expertise would create a premier global automotive
systems supplier. The combination would also allow Delco and Delphi to compete
more effectively in markets worldwide by developing new electronically enhanced
vehicle systems with improved functionality, lower cost, and higher quality. In
addition, the integration of administration and operations will allow the
businesses to realize significant structural cost savings.
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"Our first priority is to successfully integrate Delco and Delphi to create a
`smart parts' powerhouse that will focus on high growth opportunities in the
automotive electronics and components sector," said Smith. "Our next priority
will be to demonstrate the competitiveness of the combined operations. Only then
will we be able to consider the future timing of a possible partial public
offering of the combined businesses."
Record dates
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The proposal will be submitted to GM $1-2/3 and Class H common stockholders
of record on October 15, 1997 for their approval. In order for GM stockholders
to receive the distribution of Class A common stock of Hughes Defense, they must
be holders of record at the time the merger becomes effective.
Regulatory reviews
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General Motors received a private letter ruling from the U.S. Internal
Revenue Service in July 1997, confirming that the spin-off of Hughes Defense
would be tax free to GM and its stockholders for U.S. federal income tax
purposes. In addition, GM and Raytheon have reached a preliminary agreement with
the U.S. Department of Justice and U.S. Department of Defense regarding the
basis upon which the merger of Hughes Defense and Raytheon can proceed. The
preliminary agreement contemplates certain divestitures and operating
agreements, the implementation of which will not be materially adverse to the
businesses when merged. GM and Raytheon expect to finalize the agreement and
antitrust clearance later this month.
GM and Hughes Defense (in the name of H.E. Holdings) filed registration
statements today with the U.S. Securities and Exchange Commission (SEC),
including a preliminary solicitation statement. The registration statements have
not yet become effective.
No offering of Hughes Defense common stock or the new GM Class H common stock
and no solicitation of any proxy or written consent will be made except by means
of the solicitation statement/prospectus, and no sale of such securities or
solicitation of any proxy or written consent may be made prior to the time the
registration statement becomes effective. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy, or the
solicitation of a proxy or written consent, nor shall there be any sale of such
securities in any state in which sale or solicitation of sale would be unlawful
prior to registration or qualification under the securities law of any such
state.
Forward looking statements
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Statements made herein concerning the expected benefits of the proposed
transactions, including the spin-off and merger of Hughes Defense, the growth
strategy of Hughes Electronics and the integration of Delco and Delphi,
constitute forward-looking information. The realization of benefits from these
transactions is subject to numerous uncertainties and risks which are described
in GM's filings with the Securities and Exchange Commission and which will be
described in the consent solicitation statement/prospectus for the transactions.
* * *
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
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(Registrant)
Date October 6, 1997
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By
/s/Peter R. Bible
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(Peter R. Bible,
Chief Accounting Officer)
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