<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
(AMENDMENT NO. 2)
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
GENERAL MOTORS CORPORATION
(NAME OF ISSUER)
GENERAL MOTORS CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
CLASS H COMMON STOCK
(TITLE OF CLASS OF SECURITIES)
370442501
(CUSIP NUMBER OF CLASS OF SECURITIES)
PETER R. BIBLE
CHIEF ACCOUNTING OFFICER
GENERAL MOTORS CORPORATION
100 RENAISSANCE CENTER
DETROIT, MICHIGAN 48243-7301
(313) 556-5000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
WARREN G. ANDERSEN ROBERT S. OSBORNE, P.C.
GENERAL MOTORS CORPORATION KIRKLAND & ELLIS
3031 WEST GRAND BOULEVARD 200 EAST RANDOLPH DRIVE
DETROIT, MICHIGAN 48202-3091 CHICAGO, ILLINOIS 60601-6636
(313) 974-5000 (312) 861-2000
This statement is filed in connection with (check the appropriate box):
a.[X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b.[X] The filing of a registration statement under the Securities Act of
1933.
c.[_] A tender offer.
d.[_] None of the above.
Check the following box if soliciting materials or an information statement
referred to in checking box (a) are preliminary copies: [X]
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<PAGE>
ITEMS 1 THROUGH 17. INTRODUCTION
This Amendment to the Rule 13e-3 Transaction Statement (the "Transaction
Statement") is being filed by General Motors Corporation, a Delaware
corporation ("General Motors"), in connection with a series of related
transactions (the "Hughes Transactions") pursuant to which, among other
things, each issued and outstanding share of Class H Common Stock, $0.10 par
value per share, of General Motors ("GM Class H Common Stock") will be
recapitalized and converted into one share of a new class of common stock of
General Motors ("New GM Class H Common Stock") and the right to receive a
distribution of Class A Common Stock, $0.01 par value per share ("Class A
Common Stock"), of HE Holdings, Inc. ("HE Holdings"). As a result of the
Hughes Transactions, among other things, (a) holders of GM Class H Common
Stock will remain stockholders of General Motors as holders of New GM Class H
Common Stock and become stockholders of HE Holdings, which, immediately after
the Hughes Transactions, will merge with Raytheon Company and be renamed
"Raytheon Company," and (b) GM Class H Common Stock will cease to exist. This
Amendment amends and supplements the Transaction Statement as filed previously
hereto.
General Motors has filed a Registration Statement on Form S-4 for the New GM
Class H Common Stock (as amended and including exhibits, the "New GM Class H
Registration Statement") and HE Holdings has filed a Registration Statement on
Form S-4 for the Class A Common Stock (as amended and including exhibits, and
together with the New GM Class H Registration Statement, the "Registration
Statements") with the Securities and Exchange Commission previously hereto in
connection with the Hughes Transactions.
The cross reference sheet on the following pages, which is supplied pursuant
to General Instruction F to Schedule 13E-3, shows the location in the
solicitation statement/prospectus that forms a part of the Registration
Statements (as amended, the "Solicitation Statement/Prospectus") of the
information required to be included in response to the items of the
Transaction Statement. The information set forth in the Registration
Statements is incorporated herein by reference in its entirety, and responses
to each item herein are qualified in their entirety by such reference.
ITEM 16. ADDITIONAL INFORMATION
The information contained in the Registration Statements is incorporated
herein by reference in its entirety.
1
<PAGE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
Exhibit (a) Not applicable.
Exhibit (b)(1) Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), dated October 6, 1997, which
is included in Appendix B attached to the Solicitation
Statement/Prospectus filed as Exhibit (d) hereto.
Exhibit (b)(2) Opinion of Salomon Brothers Inc ("Salomon Brothers"), dated
October 6, 1997, which is included in Appendix B attached to
the Solicitation Statement/Prospectus filed as Exhibit (d)
hereto.
Exhibit (b)(3) Opinion of Goldman, Sachs & Co. Incorporated ("Goldman
Sachs"), dated January 16, 1997, which is included in
Appendix B attached to the Solicitation Statement/Prospectus
filed as Exhibit (d) hereto.
Exhibit (b)(4) Presentation to the General Motors Board of Directors
Regarding the Hughes Transactions, dated January 16, 1997,
given by Merrill Lynch and Salomon Brothers.
Exhibit (b)(5) Presentation to the General Motors Board of Directors, dated
January 16, 1997, given by Goldman Sachs.
Exhibit (b)(6) Presentation to the General Motors Board of Directors
Regarding the Hughes Transactions, dated October 6, 1997,
given by Merrill Lynch and Salomon Brothers.
Exhibit (b)(7) Presentation to the General Motors Board of Directors
Regarding the Hughes Transactions, dated October 6, 1997,
given by Merrill Lynch.
Exhibit (b)(8) Presentation to the General Motors Board of Directors
Regarding the Hughes Transactions, dated October 6, 1997,
given by Salomon Brothers.
Exhibit (c)(1) Form of Agreement and Plan of Merger by and between General
Motors Corporation and GM Mergeco Corporation, which is
attached as Appendix A to the Solicitation
Statement/Prospectus filed as Exhibit (d) hereto. Executed
Agreement and Plan of Merger to be included as Appendix A to
the Solicitation Statement/Prospectus by amendment.
Exhibit (c)(2) Implementation Agreement by and between General Motors
Corporation and Raytheon Company, dated as of January 16,
1997 (filed as Exhibit 2(b) to the Current Report on Form 8-
K of General Motors Corporation, dated January 16, 1997, and
incorporated herein by reference).
Exhibit (d) Solicitation Statement/Prospectus (and Consent Cards).
Exhibit (e) Not applicable.
Exhibit (f) Not applicable.
2
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM CAPTION OR LOCATION IN SOLICITATION
NUMBER STATEMENT/PROSPECTUS
------------------- -----------------------------------
<C> <S> <C>
1. Issuer and Class of
Security
Subject to the
Transaction
(a)..................... Introduction--The Issuers
(b)..................... GM Class H Common Stock--Introduction
(c)..................... GM Class H Common Stock--Price Range and Dividends
(d)..................... Considerations Relating to GM's Dual-Class Common Stock
Capital Structure--Overview; GM Class H Common Stock--
Price Range and Dividends; --Dividend Policy
(e)..................... See Annex 1 to the Transaction Statement.
(f)..................... See Annex 1 to the Transaction Statement.
2. Identity and Background. See Annex 1 to the Transaction Statement.
(a)..................... See Annex 1 to the Transaction Statement.
(b)..................... See Annex 1 to the Transaction Statement.
(c)..................... See Annex 1 to the Transaction Statement.
(d)..................... See Annex 1 to the Transaction Statement.
(e)..................... See Annex 1 to the Transaction Statement.
(f)..................... See Annex 1 to the Transaction Statement.
(g)..................... See Annex 1 to the Transaction Statement.
3. Past Contacts,
Transactions or
Negotiations
(a)..................... Not applicable
(b)..................... Special Factors--Background of the Hughes Transactions
4. Terms of Transaction
(a)..................... Special Factors--The Distribution Ratio; Description of
the Hughes Transactions; Description of the Raytheon
Merger; Separation and Transition Arrangements;
Considerations Relating to GM's Dual-Class Common
Stock Capital Structure; New GM Class H Common Stock;
New Raytheon Capital Stock
(b)..................... Not applicable
5. Plans or Proposals of
the Issuer
or Affiliate
(a)..................... Not applicable
(b)..................... Not applicable
(c)..................... Not applicable
(d)..................... Considerations Relating to GM's Dual-Class Common Stock
Capital Structure--New GM Board Policy Statement; New
GM Class H Common Stock--GM Certificate of
Incorporation Provisions Regarding Dividends; --
Dividend Policy
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM CAPTION OR LOCATION IN SOLICITATION
NUMBER STATEMENT/PROSPECTUS
------------------- -----------------------------------
<C> <S> <C>
(e)..................... Special Factors--Purposes of the Hughes Transactions--
Integration of Delco and Delphi; --Background of the
Hughes Transactions--Development of the Hughes
Transactions and The Raytheon Merger--September 23,
1997 Capital Stock Committee Meeting
(f)..................... Not applicable
(g)..................... Not applicable
6. Source and Amounts of
Funds
or Other Consideration
(a)..................... Estimated Fees and Expenses
(b)..................... Estimated Fees and Expenses
(c)..................... Not applicable
(d)..................... Not applicable
7. Purpose(s),
Alternatives,
Reasons and Effects
(a)..................... Special Factors--Purposes of the Hughes Transactions
(b)..................... Special Factors--Alternatives to the Hughes
Transactions
(c)..................... Special Factors--Purposes of the Hughes Transactions;
--Alternatives to the Hughes Transactions; --
Background of the Hughes Transactions
(d)..................... Special Factors--Certain U.S. Federal Income Tax
Considerations Relating to Certain of the Hughes
Transactions; --The Distribution Ratio; Description of
the Hughes Transactions; Description of the Raytheon
Merger
8. Fairness of the
Transaction
(a)..................... Special Factors--Recommendations of the Capital Stock
Committee and the GM Board; Fairness of the Hughes
Transactions
(b)..................... Special Factors--Recommendations of the Capital Stock
Committee and the GM Board; Fairness of the Hughes
Transactions
(c)..................... Special Factors--Requisite Stockholder Approval of the
Hughes Transactions; Description of the Hughes
Transactions--Stockholder Approval of the Hughes
Transactions; Solicitation of Written Consent of GM's
Common Stockholders
(d)..................... See Annex 1 to the Transaction Statement.
(e)..................... Special Factors--Recommendations of the Capital Stock
Committee and the GM Board; Fairness of the Hughes
Transactions
(f)..................... Not applicable
9. Reports, Opinions,
Appraisals
and Certain
Negotiations
(a)..................... Special Factors--Background of the Hughes Transactions;
--Hughes Transactions Fairness Opinions: Merrill Lynch
and Salomon Brothers; Description of the Raytheon
Merger--Raytheon Merger Fairness Opinion: Goldman
Sachs
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM CAPTION OR LOCATION IN SOLICITATION
NUMBER STATEMENT/PROSPECTUS
------------------- -----------------------------------
<C> <S> <C>
(b)..................... Special Factors--Background of the Hughes Transactions;
--Hughes Transactions Fairness Opinions: Merrill Lynch
and Salomon Brothers; Description of the Raytheon
Merger--Raytheon Merger Fairness Opinion: Goldman
Sachs
(c)..................... Special Factors--Hughes Transactions Fairness Opinions:
Merrill Lynch and Salomon Brothers; Description of the
Raytheon Merger--Raytheon Merger Fairness Opinion:
Goldman Sachs; Appendix B--Fairness Opinions
10. Interest in Securities
of the Issuer
(a)..................... Security Ownership of Certain Beneficial Owners and
Management of General Motors; See also Annex 1 to the
Transaction Statement.
(b)..................... See Annex 1 to the Transaction Statement.
11. Contracts, Arrangements Description of the Hughes Transactions--GM Spin-Off
or Merger Agreement; Description of the Raytheon Merger--
Understandings with Implementation Agreement
Respect to the Issuer's
Securities
12. Present Intention and
Recommendation of
Certain
Persons with Regard to
the
Transaction
(a)..................... Solicitation of Written Consent of GM's Common
Stockholders-- Matter to be Approved. Other than as
set forth in such section, General Motors has not
received any notice of intent with respect to the vote
on the Hughes Transactions from any person enumerated
in Item 12(a) of Schedule 13E-3.
(b)..................... Special Factors--Background of the Hughes Transactions;
--Recommendations of the Capital Stock Committee and
the GM Board; Fairness of the Hughes Transactions;
Solicitation of Written Consent of GM's Common
Stockholders--Matter to be Approved. Other than as set
forth in such sections, General Motors has not
received any notice that any person enumerated in Item
12(a) of Schedule 13E-3 has made any recommendation
with respect to the Hughes Transactions.
13. Other Provisions of the
Transaction
(a)..................... Description of the Hughes Transactions--No Appraisal
Rights
(b)..................... Not applicable
(c)..................... Not applicable
14. Financial Statements
(a)..................... Summary--Certain Historical and Pro Forma Per Share
Data--GM Common Stock Historical Per Share Data; Where
You Can Find More Information
(b)..................... Not applicable
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 13E-3 ITEM CAPTION OR LOCATION IN SOLICITATION
NUMBER STATEMENT/PROSPECTUS
------------------- -----------------------------------
<C> <S> <C>
15. Persons and Assets
Employed,
Retained or Utilized
(a)..................... Special Factors--Background of the Hughes Transactions;
Solicitation of Written Consent of GM's Common
Stockholders
(b)..................... Solicitation of Written Consent of GM's Common
Stockholders
16. Additional Information The information contained in the Registration
Statements is incorporated by reference herein in its
entirety.
17. Material to be Filed as
Exhibits
(a)..................... Not applicable
(b)..................... Fairness opinions of each of Merrill Lynch, Salomon
Brothers and Goldman Sachs, which are included in
Appendix B attached to the Solicitation
Statement/Prospectus filed as Exhibit (d)
hereto; Presentations to the General Motors Board of
Directors given by (i) Merrill Lynch and Salomon
Brothers, (ii) Goldman Sachs, (iii) Merrill Lynch and
Salomon Brothers, (iv) Merrill Lynch, and (v) Salomon
Brothers, which are filed as Exhibits (b)(4), (b)(5),
(b)(6), (b)(7) and (b)(8), respectively, hereto
(c)..................... Form of Agreement and Plan of Merger by and between
General Motors Corporation and GM Mergeco Corporation,
which is attached as Appendix A to the Solicitation
Statement/Prospectus filed as Exhibit (d) hereto;
Implementation Agreement by and between General Motors
Corporation and Raytheon Company, dated as of January
16, 1997
(d)..................... New GM Class H Registration Statement filed as Exhibit
(d)(1)
hereto; Class A Registration Statement filed as
Exhibit (d)(2) hereto
(e)..................... Not applicable
(f)..................... Not applicable
</TABLE>
6
<PAGE>
ANNEX 1
ITEM 1. ISSUER AND CLASS
ITEM 1(E)
On April 27, 1995, General Motors registered under the Securities Act an
underwritten public offering of 15 million shares of GM Class H Common Stock
owned by Howard Hughes Medical Institute ("HHMI"). All such shares were sold
to the public at a price per share of $38.50. General Motors received none of
the proceeds of this offering. Before deducting expenses, HHMI received
aggregate proceeds from the offering of $557,500,000.
ITEM 1(F)
Since January 1, 1995, neither General Motors nor any of its affiliates has
purchased GM Class H Common Stock in open-market or negotiated transactions.
ITEM 2. IDENTITY AND BACKGROUND
General Motors, the person filing the Transaction Statement, is the issuer
of the class of equity securities which is the subject of the Rule 13e-3
transaction.
ITEM 2(A)
The persons enumerated in General Instruction C to Schedule 13E-3 (each, an
"Instruction C Person") are Anne L. Armstrong, Percy N. Barnevik, John H.
Bryan, Thomas E. Everhart, Charles T. Fisher, III, George M.C. Fisher, J.
Willard Marriott, Jr., Ann D. McLaughlin, Harry J. Pearce, Eckhard Pfeiffer,
John G. Smale, John F. Smith, Jr., Louis W. Sullivan, Dennis Weatherstone,
Thomas H. Wyman, C. Michael Armstrong, J.T. Battenberg, III, Louis R. Hughes,
J. Michael Losh and G. Richard Wagoner, Jr.
ITEM 2(B) THROUGH (D)
The following information with respect to principal occupation or employment
and name of the corporation or other organization in which such occupation or
employment is carried on and in regard to other affiliations has been
furnished to General Motors by the Instruction C Persons.
ANNE L. ARMSTRONG, P.O. Box 1358, Kingsville, Texas 78364; Chairman, Board
of Trustees, Center for Strategic and International Studies.
PERCY N. BARNEVIK, Affolternstrasse 44, Box 8131, CH-8050 Zurich,
Switzerland; Chairman, ABB Asea Brown Boveri Ltd., Zurich, Switzerland,
serving electric power generation, transmission and distribution customers as
well as industrial, environmental control and mass transit markets.
JOHN H. BRYAN, Sara Lee Corporation, Three First National Plaza, Chicago,
Illinois 60602-4260; Chairman and Chief Executive Officer, Sara Lee
Corporation, Chicago.
THOMAS E. EVERHART, California Institute of Technology, Parsons-Oates Hall
of Administration, 1201 East California Boulevard, Pasadena, California 91125;
President and Professor of Electrical Engineering and Applied Physics,
California Institute of Technology, Pasadena.
CHARLES T. FISHER, III, 100 Renaissance Center, Detroit, Michigan 48243;
Retired Chairman and President of NBD Bancorp, Inc. and its subsidiary NBD
Bank, N.A.
GEORGE M.C. FISHER, 343 State Street, Rochester, New York 14650; Chairman
and Chief Executive Officer, Eastman Kodak Company, Rochester, NY, since
December 1, 1993. Held additional office of President (December 1993-December
1996); Chairman and Chief Executive Officer, Motorola, Inc. (1990-1993); 1303
East Algonquin Road, Schaumburg, Illinois 60196.
7
<PAGE>
J. WILLARD MARRIOTT, JR., Marriott International, Inc., One Marriott Drive,
Washington, D.C. 20058; Chairman and Chief Executive Officer, Marriott
International, Inc., Washington, D.C., since October 1993; President (October
1993-March 1997); Chairman, President and Chief Executive Officer, Marriott
Corporation (1985-1993).
ANN D. MCLAUGHLIN, 4320 Garfield, N.W., Washington, D.C.; Former U.S.
Secretary of Labor (1987-1989); Chairman, The Aspen Institute; President,
Federal City Council, Washington, D.C. (1990-1995); 1155 15th Street N.W.,
Washington, D.C. 20005.
HARRY J. PEARCE, General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan 48202-3091; Vice Chairman, Board of Directors since January
1, 1996 with responsibility for Hughes Electronics Corporation, GM Locomotive
Group, Allison Transmission Division and Corporate Affairs; Executive Vice
President (1994-1995) and General Counsel (1992-1994).
ECKHARD PFEIFFER, 20555 State Highway 249, Houston, Texas 77070; President,
Chief Executive Officer and Director (since October 1991), Compaq Computer
Corporation, Houston, Texas.
JOHN G. SMALE, The Procter & Gamble Company, P.O. Box 599, Cincinnati, Ohio
45201-0599; Chairman of the Executive Committee of General Motors Corporation
since January 1, 1996, former Chairman, General Motors Corporation (November
1992-December 1995).
JOHN F. SMITH, JR., General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan 48202-3091; Chairman, General Motors Corporation since
January 1, 1996, and Chief Executive Officer and President since 1992.
LOUIS W. SULLIVAN, Morehouse School of Medicine, 720 Westview Drive, S.W.,
Atlanta, Georgia 30310-1495; President, Morehouse School of Medicine, Atlanta,
Georgia, since January 21, 1993; U.S. Secretary of Health and Human Services
(1989-1993); 200 Independence Avenue, S.W., Washington, D.C. 20201.
DENNIS WEATHERSTONE, J.P. Morgan & Co. Incorporated, 60 Wall Street, 21st
Floor, New York, New York 10260; Retired Chairman and currently director of J.
P. Morgan & Co. Incorporated and its subsidiary Morgan Guaranty Trust Company
of New York.
THOMAS H. WYMAN, S.G. Warburg & Co., Inc., 277 Park Avenue, New York, New
York 10172; Senior Adviser, SBC Warburg Inc., Chairman, S.G. Warburg & Co.
Inc., New York (1992-1996).
C. MICHAEL ARMSTRONG, Hughes Electronics Corporation, 7200 Hughes Terrace,
Los Angeles, California 90045-0066; Chairman and Chief Executive Officer,
Hughes Electronics Corporation since March 1992.
J. T. BATTENBERG, III, General Motors Corporation, 3044 West Grand
Boulevard, Detroit, Michigan, 48202-3091; Executive Vice President, General
Motors since July 1995 and President, Delphi Automotive Systems since July
1994, Senior Vice President (July 1994-July 1995), Vice President and Group
Executive in charge of the Automotive Components Group (May 1992-July 1994).
LOUIS R. HUGHES, General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan, 48202-3091; Executive Vice President, International
Operations, General Motors since November 1992 and President, International
Operations since September 1994.
J. MICHAEL LOSH, General Motors Corporation, 3044 West Grand Boulevard,
Detroit, Michigan, 48202-3091; Executive Vice President and Chief Financial
Officer, General Motors since July 1994, Group Executive in charge of North
American Vehicle Sales, Service, and Marketing (May 1992-July 1994).
G. RICHARD WAGONER, JR., General Motors Corporation, 3044 West Grand
Boulevard, Detroit, Michigan, 48202-3091; Executive Vice President, General
Motors since November 1992 and President, North American Operations since July
1994, Chief Financial Officer (November 1992-July 1994).
8
<PAGE>
ITEM 2(E)
To the best of General Motors' knowledge, during the past five years, no
Instruction C Person has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
ITEM 2(F)
To the best of General Motors' knowledge, during the past five years, no
Instruction C Person has been party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 2(G)
All of the Instruction C Persons are U.S. citizens, except for Mr. Barnevik,
who is a citizen of Sweden, and Mr. Pfeiffer, who is a citizen of Germany.
ITEM 8. FAIRNESS OF THE TRANSACTION.
ITEM 8(D)
No unaffiliated representative has been retained to act solely on behalf of
unaffiliated security holders for the purposes of negotiating the terms of the
Hughes Transactions or preparing a report concerning the fairness of the
Hughes Transactions.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
ITEM 10(A)
The following table sets forth, based on information available to General
Motors as of October 3, 1997, beneficial ownership of GM Class H Common Stock
for certain Instruction C Persons and pension and profit-sharing or similar
plans of General Motors (excluding its subsidiaries). Ownership of less than
one percent of the outstanding shares of GM Class H Common Stock is indicated
by an asterisk.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
BENEFICIAL OWNER OWNED CLASS
---------------- ------------ -------
<S> <C> <C>
J. T. Battenberg, III............................... 6,238 *
J. M. Losh.......................................... 5,566 *
General Motors Retirement Plan for Salaried
Employees.......................................... 0 0
General Motors Savings Plans Master Trust........... 5,379,217 5.25%
General Motors Canadian Savings-Stock Purchase
Program............................................ 58,131 *
</TABLE>
ITEM 10(B)
To be provided by amendment.
9
<PAGE>
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement, as amended, is true, complete and
correct.
General Motors Corporation
/s/ John F. Smith, Jr.
By: _________________________________
John F. Smith, Jr.
Chairman, Chief Executive Officer,
and President
Dated: October 9, 1997
10
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
(a)(1) Not applicable.
(b)(1) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated
October 6, 1997, which is included in Appendix B attached to the So-
licitation Statement/Prospectus filed as Exhibit (d) hereto.
(b)(2) Opinion of Salomon Brothers Inc, dated October 6, 1997, which is in-
cluded in Appendix B attached to the Solicitation
Statement/Prospectus filed as Exhibit (d) hereto.
(b)(3) Opinion of Goldman, Sachs & Co. Incorporated, dated January 16,
1997, which is included in Appendix B attached to the Solicitation
Statement/Prospectus filed as Exhibit (d) hereto.
(b)(4) Presentation to the General Motors Board of Directors Regarding the
Hughes Transactions, dated January 16, 1997, given by Merrill Lynch
and Salomon Brothers.*
(b)(5) Presentation to the General Motors Board of Directors, dated January
16, 1997, given by Goldman Sachs.**
(b)(6) Presentation to the General Motors Board of Directors Regarding the
Hughes Transactions, dated October 6, 1997, given by Merrill Lynch
and Salomon Brothers.***
(b)(7) Presentation to the General Motors Board of Directors Regarding the
Hughes Transactions, dated October 6, 1997, given by Merrill
Lynch.***
(b)(8) Presentation to the General Motors Board of Directors Regarding the
Hughes Transactions, dated October 6, 1997, given by Salomon Broth-
ers.***
(c)(1) Form of Agreement and Plan of Merger by and between General Motors
Corporation and GM Mergeco Corporation, which is attached as Appen-
dix A to the Solicitation Statement/Prospectus filed as Exhibit (d)
hereto. Executed Agreement and Plan of Merger to be included as Ap-
pendix A to the Solicitation Statement/Prospectus by amendment.
(c)(2) Implementation Agreement by and between General Motors Corporation
and Raytheon Company, dated as of January 16, 1997 (filed as Exhibit
2(b) to the Current Report on Form 8-K of General Motors Corpora-
tion, dated January 16, 1997, and incorporated herein by reference).
(d) Solicitation Statement/Prospectus (and Consent Cards).*
(e)(1) Not applicable.
(f)(1) Not applicable.
</TABLE>
- --------
* Filed previously
** Filed herewith
***To be filed by amendment
11
<PAGE>
Exhibit (b)(5)
CONFIDENTIAL
MATERIAL PRESENTED TO THE BOARDS OF DIRECTORS
OF
GENERAL MOTORS CORPORATION,
HUGHES ELECTRONICS CORPORATION
AND
HE HOLDINGS, INC.
----------------
AT A MEETING ON
JANUARY 16, 1997
----------------
The following pages contain material that was provided to the Boards of
Directors of General Motors Corporation, Hughes Electronics Corporation and HE
Holdings, Inc. (the "Companies") in the context of a meeting of the Boards of
Directors held to evaluate the transactions described in the Solicitation
Statement which is part of this Schedule 13E-3. The accompanying material was
compiled or prepared on a confidential basis solely for use by the Boards of
Directors and not with a view toward public disclosure under the Securities Act
of 1933 or the Securities Exchange Act of 1934 (the "Federal Securities Law").
The information contained in this material was obtained from the Companies and
other sources. Any estimates and projections contained herein have been prepared
by the management of the Companies or Raytheon Company and involve numerous and
significant subjective determinations, which may or may not be correct. No
representation or warranty, expressed or implied, is made as to the accuracy or
completeness of such information and nothing contained herein is, or shall be
relied upon as, a promise or representation, whether as to the past or the
future. Because this material was prepared for use in the context of an oral
presentation to the Boards of Directors, it was not prepared to comply with the
disclosure standards set forth under the Federal Securities Laws and may be used
by readers not as familiar with the business and affairs of the Companies as the
Boards of Directors, neither the Companies nor Goldman, Sachs & Co. nor any of
their respective legal or financial advisors or accountants takes any
responsibility for the accuracy or completeness of any of the material when used
by persons other than the Boards of Directors of the Companies. Neither the
Companies nor Goldman, Sachs & Co. expects to update or otherwise revise the
accompanying materials.
<PAGE>
HIGHLY CONFIDENTIAL
===================
Goldman Sachs
Presentation to the Board of Directors
Prepared By
Goldman, Sachs & Co
January 16, 1997
<PAGE>
Table of Exhibits
I. Summary of Proposals
II. Valuation Parameters
Public Market Statistics
Analysis of Relevant Transactions
Discounted Cash Flow Analysis
Contribution Analysis
III. Review of Raytheon Company
Stock Trading History
Summary Financial Data
Review of Synergies
IV. Analysis of Raytheon Proposal
Analysis of Proposal
Pro Forma Trading Analysis
V. Review of Northrop Grumman Corporation
Stock Trading History
Summary Financial Data
Review of Synergies
VI. Analysis of Northrop Grumman Proposal
Analysis of Proposal
Pro Forma Trading Analysis
A. Appendix
Backup Exhibits
<PAGE>
I.
SUMMARY OF PROPOSALS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
--------------------------------- -------------------------------
Raytheon Northrop Grumman
--------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Value $9,500 $9,500 $9,500 $9,301 $9,301 $9,301
Low Midpoint High Low Midpoint High
---------- ---------- --------- -------- ---------- -------
Value of Equity $4,570 $5,078 $5,586 $4,208 $4,676 $5,144
Debt Assumed 4,930 4,422 3,914 5,093 4,625 4,157
Additional Debt 4,694 4,186 3,678 4,857 4,389 3,921
Existing Debt 236 236 236 236 236 236
Equity - Collar (a) $44.42 $49.35 $54.29 $72.90 $81.00 $89.10
January 6, 1997 $50.00 $81.88
January 10, 1997 47.25 77.75
Number of Class A Shares to be
distributed to GM Holders (b) 102.9 57.7
Number of Class B Shares Exchanged
for Merger Partner Common (b) 235.5 57.7
----- ----
Total New Company Shares (b) 338.4 115.5
Class A Ownership in New Company (b) 30.4% 50.0%
</TABLE>
(a) Collar range for each proposal reflects 10% change in stock price in either
direction from midpoint.
(b) Share figures reflect primary shares outstanding.
Midpoint of $81.00 for Northrop Grumman represents 20 day average closing
price for the period prior to January 9, 1997.
Midpoint of $49.35 for Raytheon represents average trading price during the
30 day period prior to January 6, 1997.
1
<PAGE>
Summary of Proposals
Key Terms
<TABLE>
<CAPTION>
Term Raytheon Northrop Grumman
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Surviving Corporation C.M. Armstrong to be director and chairman of Board C.M. Armstrong to be director
Management and Transition Committee
Board M.T. Smith to be President, COO and director
C.H. Noski to be director and member of Audit
Committee Third new member to be mutually determined
Current GM outside director to be a director and
member of Nominating Committee and Board
Transition Committee
Other governance bodies established with HAC
representation:
Management Transition Committee
Defense Business Executive Council
Voting Rights Class A to have 80% of votes for election of directors; Class A to have 80% of votes for election of
Class A and Class B to have class votes on all other directors; Class A and Class B each have one
matters vote per share on all other matters
Closing Balance Sheet Adjusted net worth of HAC Net working capital of HAC
Adjustment
HAC earnings until closing accrue to GM/Telecom HAC earnings until closing accrue to GM/Telecom
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
II.
Public Market Statistics
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Levered Multiple of P/E Multiple (c)
Market Debt/ 1997 ---------------------------
Company Cap. (a) Cap. EBITDA (b) 1997E 1998E
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Boeing (d) $36,637 31.4% 8.6x 19.6x 15.6x
General Dynamics 3,693 8.8% 9.3 15.4 15.1
Hughes Electronics 24,442 3.0% 9.5 23.6 20.4
Lockheed Martin 28,626 62.6% 6.6 14.0 12.5
Northrop Grumman 7,929 62.6% 6.9 13.3 11.8
Raytheon (e) 15,426 49.9% 8.3 13.1 11.9
Median 40.7% 8.4x 14.7x 13.8x
Mean 36.4% 8.2 16.5 14.5
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Based on closing stock prices as of 01/11/97 and balance sheet data
as of September 30, 1996.
(b) EBITDA estimates as per Goldman Sachs research (November 1996).
Figures exclude pension and non-cash income.
(c) IBES estimates for EPS as of 01/08/97. Estimates for companies with
non-calendar fiscal year ends have been calendarized.
(d) Figures have been adjusted pro forma for acquisition of Rockwell A&D
but do not include impact of pending acquisition of McDonnell
Douglas.
(e) Figures have not been adjusted for pending acquisition of Texas
Instruments' DS&E business.
3
<PAGE>
Analysis of Relevant Transactions
($ in millions)
<TABLE>
<CAPTION>
- ---- ----------------- ---------------- ------------- ------------- ------------------------ ------------ -----------
Multiple
Multiple of Current Year of Next Year Multiple of
Form of Total ------------------------ ------------ Book
Date Acquiring Company Acquired Company Consideration Consideration Sales EBIT EBITDA Sales EBIT Value
- ---- ----------------- ---------------- ------------- ------------- ----- ---- ------ ----- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pending Raytheon Texas Instruments DS&E Cash $2,950 1.68x 12.0x 10.6x 1.66x 12.9x 3.4x
Pending Boeing McDonnell Douglas Stock 13,345 1.01 10.5 10.0 0.95 8.8 4.4
12/96 Boeing Rockwell A&D Cash/Stock 3,025 0.94 11.1 9.4 0.93 9.4 3.9
04/96 Lockheed Martin Loral Cash 9,066 1.44 12.9 9.2 1.33 11.9 3.8
03/96 Northrop Grumman Westinghouse ESG Cash 3,000 1.17 12.7 9.3 1.25 10.9 9.6
05/95 Raytheon E-Systems Cash 2,340 1.06 11.6 8.3 0.96 10.6 2.8
03/95 Martin Marietta Lockheed Stock 5,227 0.56 8.6 5.4 0.57 8.2 1.9
05/94 Northrop Grumman Cash 2,190 0.64 10.9 7.5 0.66 9.9 2.5
-------------------------------------------------------------------------------------------------------------------------
High 1.68x 12.9x 10.6x 1.66 12.9x 9.6x
Median 1.03 11.4 9.3 0.96 10.3 3.6
-------------------------------------------------------------------------------------------------------------------------
Proposed Raytheon Company Hughes Aircraft Company Cash/Stock $9,500 1.53x 13.7x 11.7x 1.43x 13.0x 1.9x
Proposed Northrop Grumman Hughes Aircraft Company Cash/Stock 9,301 1.50 13.4 11.4 1.40 12.7 1.8
</TABLE>
4
<PAGE>
Summary Financial Data
Hughes Aircraft Company
($ in millions)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------------------- CAGR
1996 1997 1998 1999 2000 2001 1996-2001
---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement
- ----------------
Revenues $6,220 $6,640 $7,148 $7,657 $8,826 $9,600 9.1%
EBITDA 814 863 893 955 1,080 1,163 7.4%
EBIT (a) 695 732 750 800 916 998 7.5%
Margin 11.2% 11.0% 10.5% 10.5% 10.4% 10.4%
<CAPTION>
Balance Sheet 9/30/96
- ------------- -------
<S> <C>
Debt (b) $236
Equity 5,044
Debt/Cap Ratio 4.5%
</TABLE>
Source: Financial information provided by HAC management, December 1996.
(a) EBIT figures excludes impact of amortization of goodwill.
(b) Pro forma for $141 debt relating to the pending acquisition of the Marine
Systems business of Alliant Techsystems.
5
<PAGE>
Discounted Cash Flow Analysis
($ in millions)
<TABLE>
<CAPTION>
Multiple of Terminal EBITDA
------------------------------------------
<S> <C> <C> <C>
Discount Rate 7.0x 7.5x 8.0x
- ---------------------------------------------------------------------
10.0% $7,022 $7,389 $7,757
11.0% $6,745 $7,096 $7,448
12.0% $6,482 $6,818 $7,154
</TABLE>
- --------------------------------
Cash flow projections provided by HAC management.
Terminal value calculation based on a multiple of trailing EBITDA in 2001.
All cash flows discounted to January 1, 1997.
6
<PAGE>
Discounted Cash Flow Analysis
Comparison of Synergy Values
($ in millions)
<TABLE>
<CAPTION>
- ----------------------------------------------- -----------------------------------------------
Raytheon-HAC Northrop Grumman-HAC
- ----------------------------------------------- -----------------------------------------------
Multiple of Terminal EBIT Multiple of Terminal EBIT
Discount -------------------------------- Discount --------------------------------
Rate 8.0x 9.0x 10.0x Rate 8.0x 9.0x 10.0x
- ----------- -------------------------------- ----------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10.0% $3,677 $3,999 $4,321 10.0% $1,762 $1,905 $2,049
11.0% 3,533 3,841 4,149 11.0% 1,695 1,833 1,970
12.0% 3,396 3,690 3,985 12.0% 1,632 1,763 1,894
</TABLE>
- -------------------------------
Synergy projections provided by Raytheon and Northrop Grumman managements
(January 1997).
Raytheon-HAC synergy values do not include synergies associated with Raytheon's
acquisition of TI DS&E.
Terminal value calculation based on a multiple of trailing EBIT in 2001. All
cash flows discounted to January 1, 1997.
7
<PAGE>
Contribution Analysis
Raytheon
($ in millions)
<TABLE>
<CAPTION>
% Contribution
1997E(a) HAC Raytheon(b) HAC
---------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues $6,640 $16,711 28.4%
EBITDA 863 2,257 27.7%
Operating Income(c) 732 1,788 29.1%
Levered Value(d) $9,500 $18,376 34.1%
</TABLE>
(a) Projected financial information for 1997 as per HAC management and Northrop
Grumman management.
(b) Raytheon data includes pro forma base forecast for TI, before impact of
synergies.
(c) Operating Income is before impact of goodwill amortization and pension
income.
(d) Levered value for HAC represents Raytheon proposal; levered value for
Raytheon is as of January 10, 1997 and includes $2,950 of debt for TI.
8
<PAGE>
Contribution Analysis
Northrop Grumman
($ in millions)
<TABLE>
<CAPTION>
Northrop % Contribution
1997E(a) HAC Grumman HAC
---------------- ------------ ----------------
<S> <C> <C> <C>
Revenues $6,640 *** ***
EBITDA 863 *** ***
Operating Income(b) 732 *** ***
Levered Value(c) $9,301 *** ***
</TABLE>
(a) Projected financial information for 1997 as per HAC management and Northrop
Grumman management.
(b) Operating Income is before impact of goodwill amortization and pension
income.
(c) Levered value for HAC represents Northrop Grumman proposal; levered value
for Northrop Grumman is as of January 10, 1997.
*** [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.]
9
<PAGE>
III.
Stock Trading History
Raytheon
[LINE GRAPH APPEARS HERE]
Latest Close (1/10/97) $47.25 Equity Market Cap (millions) $11,210.0
Shares Outstanding (millions)
10 Day Average $48.50 Primary 236.0
20 Day Average 48.18 Fully-Diluted 240.1
30 Day Average 48.79 Average Daily Volume 557,516
10
<PAGE>
Stock Trading History
Raytheon - Indexed
[LINE GRAPH APPEARS HERE]
11
<PAGE>
Summary Financial Data
Raytheon
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------- CAGR
1996 1997 1998 1999 2000 2001 1996-2001
---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement
- ----------------
Revenues $12,260 $14,936 $16,826 $19,219 $21,604 $23,795 14.2%
EBITDA 1,655 1,986 2,227 2,507 2,798 3,098 13.4%
EBIT 1,250 1,549 1,755 2,015 2,297 2,594 15.7%
Margin 10.2% 10.4% 10.4% 10.5% 10.6% 10.9%
Earnings Per Share $3.30 $3.60 $4.11 $4.83 $5.68 $6.57 14.8%
Annual Growth 9.2% 14.2% 17.5% 17.6% 15.7%
Impact of TI Base Plan
- ----------------------
Revenues $1,775 $1,791 $1,952 $2,056 $2,216 5.7%
EBIT 239 243 264 277 298 5.7%
Margin 13.5% 13.6% 13.5% 13.5% 13.4%
<CAPTION>
12/31/96 Pro Forma TI
-------- ------------
<S> <C> <C> <C>
Balance Sheet
- -------------
Debt $3,730 $6,680
Equity 4,600 4,600
Debt/Cap Ratio 44.8% 59.2%
Credit Ratings
S&P A+ BBB+ Watch List
Moody's A1 On Review
</TABLE>
Source: Raytheon management, January 1997.
12
<PAGE>
Review of Synergies
Raytheon
($ in millions)
<TABLE>
<CAPTION>
Years Ended December 31, 1997-2001
-----------------------------------------------------------------
- ------------------------------- 1997* 1998 1999 2000 2001 Total
Raytheon/HAC ---- ---- ---- ---- ---- -----
- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue Synergy $ 15 $220 $385 $555 $750 $1,925
Associated Margin 2 24 42 61 84 213
Pretax Cost Savings 152 343 421 393 345 1,654
Cost Recovery 0 19 64 90 90 264
- -- -- -- -- ---
Subtotal 154 387 528 544 519 2,131
Purchase Accounting Adjustments 35 72 50 50 50 257
-- -- -- -- -- ---
Subtotal $189 $459 $578 $594 $569 $2,388
- -------------------------------
Raytheon/TI
- -------------------------------
Revenue Synergy $ 0 $130 $140 $170 $190 $630
Associated Margin 0 17 18 22 25 82
Pretax Cost Savings 16 38 55 54 54 217
Cost Recovery 0 10 26 26 26 88
- -- -- -- -- --
Subtotal $ 16 $ 65 $ 99 $102 $105 $387
- -------------------------------
HAC/TI
- -------------------------------
Revenue Synergy $ 47 $190 $369 $515 $580 $1,701
Associated Margin 5 21 42 61 70 199
Pretax Cost Savings 31 97 84 72 73 357
-- -- -- -- -- ---
Subtotal $ 36 $118 $126 $133 $143 $556
---- ---- ---- ---- ---- ----
Total EBT Increase $241 $641 $803 $829 $816 $3,330
---- ---- ---- ---- ---- ------
</TABLE>
Source: Synergy information provided by Raytheon management, January 1997.
* 1997 figures represent 1/2 year.
13
<PAGE>
IV
Analysis of Proposal
Raytheon
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------------------
Summary of Terms
------------------------------------------------------------
<S> <C>
Class A Shares Issued to HAC Holders 102.9
Raytheon Stock Price (1/10/97) $47.25
Implied Equity Value $4,862
Debt Assumed 4,638
------
Total Transaction Value $9,500
======
------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Raytheon Total Transaction Value
Stock ----------------------- Pro Forma
Price % Change Equity Value Debt Total Value Debt/Cap*
----- -------- ------------ ---- ----------- ---------
<S> <C> <C> <C> <C> <C>
$37.01 (25.0%) $3,808 $4,930 $8,738 58.0%
39.48 (20.0%) 4,062 4,930 8,992 57.3%
41.95 (15.0%) 4,316 4,930 9,246 56.6%
- -------------------------------------------------------------
44.42 (10.0%) 4,570 4,930 9,500 55.9%
46.88 (5.0%) 4,824 4,676 9,500 54.6%
49.35 0.0% 5,078 4,422 9,500 53.4%
51.82 5.0% 5,332 4,168 9,500 52.2%
54.29 10.0% 5,586 3,914 9,500 51.0%
- -------------------------------------------------------------
56.75 15.0% 5,840 3,914 9,754 50.4%
59.22 20.0% 6,093 3,914 10,008 49.8%
61.69 25.0% 6,347 3,914 10,262 49.2%
- --------------------------------------------------------------------------------
</TABLE>
* Reflects impact of additional $2,950 debt relating to the pending acquisition
of Texas Instruments' DS&E business.
14
<PAGE>
Pro Forma Trading Analysis
Raytheon
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings Per Share
Stand-Alone $3.60 $4.11
Pro Forma (a) 3.43 4.15
Accretion / (Dilution) (4.7%) 1.0%
Valuation Implications
- ----------------------
1997E P/E Multiple 13.0x - 15.0x 12.0x - 14.0x
----- ----- ----- -----
Implied Stock Price $44.59 - $51.45 $49.80 - $58.10
P/E Multiple Needed to Maintain
Stock Price of Collar Midpoint 14.4x 11.9x
</TABLE>
Analysis based on transaction completed at the midpoint of the collar ($49.35).
(a) Earnings per share calculation for 1997 is pro forma assuming a full year
impact of HAC and TI transactions. EPS figures are calculated using primary
shares.
15
<PAGE>
Stock Trading History
Northrop Grumman
[GRAPH APPEARS HERE]
Latest Close (1/10/97) $ 77.75
10 Day Average $ 80.71
20 Day Average 80.74
30 Day Average 81.06
Equity Market Cap (millions) $ 4,677.2
Shares Outstanding (millions)
Primary 57.7
Fully-Diluted 59.0
Average Daily Volume 147,078
16
<PAGE>
V
Stock Trading History
Northrop Grumman - Indexed
[LINE GRAPH APPEARS HERE]
17
<PAGE>
Summary Financial Data
Northrop Grumman
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------- CAGR
1996 1997 1998 1999 2000 2001 1996-2001
---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement
- ----------------
Revenues $8,000 *** *** *** *** *** ***
EBITDA (a) 953 *** *** *** *** *** ***
EBIT (b) 594 *** *** *** *** *** ***
Margin 7.4% *** *** *** *** ***
Earnings Per Share $5.28 *** *** *** *** *** ***
Annual Growth *** *** *** *** ***
<CAPTION>
Balance Sheet 12/31/96
- ------------- --------
<S> <C>
Debt $3,490
Equity 2,175
Debt/Cap Ratio 61.6%
Credit Ratings
S&P BBB-
Moody's Baa3
</TABLE>
Source: Financial information provided by Northrop Grumman management, January
1997.
(a) EBITDA figures are before impact of pension income.
(b) EBIT figures include impact of pension income and amortization of
acquisition goodwill.
*** [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.]
18
<PAGE>
Review of Synergies
Northrop Grumman
($ in millions)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------- 1997-2001
1997 1998 1999 2000 2001 Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Revenue Synergy $5 $150 $420 $650 $1,000 $2,225
Associated Margin (11%) 1 17 46 72 110 245
Pretax Cost Savings 199 234 294 169 121 1,017
---- ---- ---- ---- ---- ------
Subtotal $200 $251 $340 $241 $231 $1,262
Other Items
Purchase Accounting Adjustments 78 83 84 86 86 417
---- ---- ---- ---- ---- ------
Total EBT Increase $278 $334 $424 $327 $317 $1,679
---- ---- ---- ---- ---- ------
</TABLE>
Source: Synergy information provided by Northrop Grumman management,
January 1997.
19
<PAGE>
VI
Analysis of Proposal
Northrop Grumman
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Summary of Terms
-------------------------------------------------------------------
<S> <C>
Class A Shares Issued to HAC Holders 57.729
Northrop Grumman Stock Price (1/10/97) $77.75
Implied Equity Value $4,488
Debt Assumed 4,813
-----
Total Transaction Value $9,301
------
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Northrop
Grumman
Stock Pro Forma
Price % Change Debt Equity Total Value Debt/Cap
- ----------------------- ------------------------------------- --------
<S> <C> <C> <C> <C> <C>
$60.75 (25.0%) $5,093 $3,507 $8,600 60.2%
64.80 (20.0%) 5,093 3,741 8,833 59.2%
68.85 (15.0%) 5,093 3,975 9,067 58.3%
72.90 (10.0%) 5,093 4,208 9,301 57.3%
76.95 (5.0%) 4,859 4,442 9,301 55.8%
81.00 0.0% 4,625 4,676 9,301 54.2%
85.05 5.0% 4,391 4,910 9,301 52.7%
89.10 10.0% 4,157 5,144 9,301 51.1%
93.15 15.0% 4,157 5,377 9,535 50.3%
97.20 20.0% 4,157 5,611 9,769 49.6%
101.25 25.0% 4,157 5,845 10,002 48.8%
- --------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Pro Forma Trading Analysis
Northrop Grumman
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings Per Share
Stand-Alone *** ***
Pro Forma (a) *** ***
Accretion/(Dilution) *** ***
Valuation Implications
- ----------------------
1997E P/E Multiple *** *** *** ***
Implied Stock Price *** *** *** ***
P/E Multiple Needed to Maintain
Stock Price of Collar Midpoint 16.3x 13.8x
</TABLE>
Analysis based on transaction completed at the midpoint of the collar ($81.00).
(a) Earnings per share calculation for 1997 is pro forma assuming a full year
impact. Assumes full benefit of synergies.
*** [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.]
21
<PAGE>
A.
Impact of Transaction
Raytheon
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------- CAGR CAGR
1996 1997 1998 1999 2000 2001 1996-2001 1997-2001
---- ---- ---- ---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raytheon
Earnings Per Share* $3.30 $3.60 $4.11 $4.83 $5.68 $6.57 14.8% 16.2%
P/E Ratio** 13.1x 11.5x 9.8x 8.3x 7.2x
Debt/Cap 44.8%
Raytheon/TI/HAC
Earnings Per Share $3.30 $3.43 $4.15 $5.13 $6.17 $7.07 16.5% 19.8%
P/E Ratio to Breakeven 13.8x 11.4x 9.2x 7.7x 6.7x
Accretion/(Dilution) (4.7%) 1.0% 6.3% 8.6% 7.6%
Debt/Cap 53.4%
</TABLE>
* Earnings per share calculated using primary shares outstanding.
** Based on latest closing stock price of $47.25 as of January 10, 1997.
22
<PAGE>
Impact of Transaction
Northrop Grumman
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------- CAGR CAGR
1996 1997 1998 1999 2000 2001 1996-2001 1997-2001
------ ------ ------ ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stand-Alone
Earnings Per Share $5.31 *** *** *** *** *** *** ***
P/E Ratio (a)
*** *** *** *** ***
Debt/Cap 62% 57% 50% 41% 51% 35%
Pro Forma
Earnings Per Share $5.31 $4.97 $5.89 $7.55 $8.37 $9.68 12.8% 18.1%
P/E Ratio to Breakeven (a) 15.7x 13.2x 10.3x 9.3x 8.0x
Accretion/(Dilution) *** *** *** *** ***
Debt/Cap 55% 51% 47% 41% 39% 33%
Pro Forma w/ Repurchase
Earnings Per Share $5.31 $5.02 $6.14 $8.28 $9.51 $11.36 16.4% 22.7%
P/E Ratio to Breakeven (a) 15.5x 12.7x 9.4x 8.2x 6.9x
Accretion/(Dilution) *** *** *** *** ***
Debt/Cap 55% 55% 55% 55% 55% 55%
</TABLE>
Source: Pro forma "Merger Consequences Analysis" as per Northrop Grumman
proposal, January 1997.
(a) Based on latest closing stock price of $77.75 as of January 10, 1997.
*** [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.]
23
<PAGE>
Summary Financial Information
HAC Segment Data
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------------------------------- 1996-2001
Projected
($ in millions) 1996 1997 1998 1999 2000 2001 CAGR
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
- --------
Sensor & Communications Systems $2,548 $2,607 $2,713 $2,860 $3,377 $3,708 7.8%
Weapons Systems 1,997 2,120 2,048 2,057 2,076 2,150 1.5%
Information Systems & Services 2,065 2,549 2,832 3,198 3,589 3,910 13.6%
Defense Systems 51 75 98 152 329 346 46.7%
Eliminations/Other (441) (711) (543) (610) (545) (514)
----- ---- ----- ----- ----- -----
Total $6,220 $6,640 $7,148 $7,657 $8,826 $9,600 9.1%
Operating Income
- ----------------
Sensor & Communications Systems $285 $333 $312 $324 $389 $420 8.1%
Weapons Systems 200 197 212 221 233 251 4.6%
Information Systems & Services 188 236 266 292 321 347 13.0%
Defense Systems 0 2 7 13 34 36 160.5%
Eliminations/Other 22 (36) (47) (50) (61) (56)
-- ---- ---- ---- ---- ----
Total $695 $732 $750 $800 $916 $998 7.5%
Revenue Growth
- --------------
Sensor & Communications Systems 15.1% 2.3% 4.1% 5.4% 18.1% 9.8%
Weapons Systems (14.0%) 6.2% (3.4%) 0.4% 0.9% 3.6%
Information Systems & Services 7.4% 23.4% 11.1% 12.9% 12.2% 8.9%
Defense Systems 45.7% 47.1% 30.7% 55.1% 116.4% 5.2%
Total 2.0% 6.8% 7.7% 7.1% 15.3% 8.8%
Operating Margin
- ----------------
Sensor & Communications Systems 11.2% 12.8% 11.5% 11.3% 11.5% 11.3%
Weapons Systems 10.0% 9.3% 10.3% 10.8% 11.2% 11.7%
Information Systems & Services 9.1% 9.3% 9.4% 9.1% 8.9% 8.9%
Defense Systems 0.6% 2.7% 7.1% 8.6% 10.3% 10.4%
Total 11.2% 11.0% 10.5% 10.5% 10.4% 10.4%
</TABLE>
Notes:
Financial projections as per HAC management, November 1996.
Adjusted to reflect impact of sale of DSO, acquisition of ATK Marine, and wins
of AIM-9X and GM University contracts.
Operating income is before impact of goodwill amortization.
24
<PAGE>
Summary Financial Information
Raytheon Segment Data
($ in millions)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------------------------
Projected 1996-2001
($ in millions) 1996 1997 1998 1999 2000 2001 CAGR
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
- --------
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
--------- ------- ------- --------- ------- -------
Total $12,355 $14,936 $16,826 $19,219 $21,604 $21,604 14.0%
Operating Income
- ----------------
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
*** *** *** *** *** *** *** ***
--------- ------- ------- --------- ------- -------
Total $1,250 $1,575 $1,785 $2,026 $2,335 $2,623 16.0%
Revenue Growth
- --------------
*** *** *** *** *** ***
*** *** *** *** *** ***
*** *** *** *** *** ***
*** *** *** *** *** ***
------- ------- --------- ------- -------
Total 20.9% 12.7% 14.2% 12.4% 10.1%
Operating Margin
- ----------------
*** *** *** *** *** *** ***
*** *** *** *** *** *** ***
*** *** *** *** *** *** ***
*** *** *** *** *** *** ***
--------- ------- ------- --------- ------- -------
Total 0.1% 10.5% 10.6% 10.5% 10.8% 11.0%
</TABLE>
Notes:
Source: Raytheon management, January 1997.
***[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST].
25
<PAGE>
***
*** [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.]
26
<PAGE>
HAC Management Assessment
Base Financial Plans
<TABLE>
<CAPTION>
1997 Cumulative 1997-2001
------------------------ ------------------------ CAGR
($ in millions) $ % Change $ % Change 1997-2001
- ---------------------------------------------------- ------------------------ ---------
<S> <C> <C> <C> <C> <C>
Raytheon
Baseline Operating Profit $1,606 $10,417 16.9%
HAC Consensus 1,557 (3.1%) 9,854 (5.4%) 14.4%
Constant Rates 1,311 (18.4%) 8,004 (23.2%) 9.9%
Baseline Synergies 190 11.8% 2,257 21.7%
HAC Consensus Synergies 287 17.9% 1,880 18.0%
Northrop Grumman
Baseline Operating Profit *** *** ***
HAC Consensus 800 *** 4,747 *** 9.3%
Constant Rates 739 *** 3,925 *** ***
Baseline Synergies 200 24.8% 1,263 26.1%
HAC Consensus Synergies 166 20.6% 986 20.3%
</TABLE>
Notes:
Analysis as per HAC management, January 1997. Assessment of impact on operating
earnings.
*** [CONFIDENTIAL MATERIAL OMITTED AND SEPARATELY FILED PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.]
27
<PAGE>
HAC Management Assessment
Revenue Synergy
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------- Total
($ in millions) 1997 1998 1999 2000 2001 1997-2001
=======================================================================================================================
- --------------------------------------------
Raytheon
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additional Revenues over Baseline Plan $15 $220 $385 $555 $750 $1,925
Additional Revenues from HAC/TI 47 190 369 515 580 1,701
-- --- --- --- --- -----
Total $62 $410 $754 $1,070 $1,330 $3,626
Additional Operating Profit $7 $45 $84 $122 $153 $411
"HAC Consensus" Adjustment -------------None-----------
Combined Defense Base (w/TI) $15,045 $16,350 $17,826 $20,000 $21,940
Synergy as a % of Base 0.4% 2.5% 4.2% 5.4% 6.1%
- --------------------------------------------
Northrop Grumman
- --------------------------------------------
Additional Revenues over Baseline Plan $5 $150 $420 $650 $1,000 $2,225
Additional Operating Profit $1 $17 $46 $72 $110 $246
"HAC Consensus" Adjustment -------------None-----------
Combined Electronics Base $10,716 $11,663 $12,811 $14,637 $16,340
Synergy as a % of Base 0.0% 1.3% 3.3% 4.4% 6.1%
</TABLE>
Notes:
Analysis as per HAC management, January 1997.
28
<PAGE>
HAC Management Assessment
Cost Synergy
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------- Total
($ in millions) 1997 1998 1999 2000 2001 1997-2001
- ------------------------------------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Raytheon
Gross Cost Reduction (Raytheon/HAC) $ 575 $ 1,150 $ 1,150 $ 1,150 $ 1,150 $ 5,175
Change in EBT (Raytheon/HAC) 152 343 421 393 345 1,654
Implied Retention Rate 26.4% 29.8% 36.6% 34.2% 30.0%
Change in EBT (HAC/TI) 31 97 84 72 73 357
Combined Change in EBT $ 183 $ 440 $ 505 $ 465 $ 418 $ 2,011
Combined Target Cost Pool (Approx.)* $11,600 $12,400 $13,400 $15,000 $16,300
Gross Savings as a % of Target Cost Pool 5.0% 9.3% 8.6% 7.7% 7.1%
HAC Cost Pool (Approx.) $ 6,000 $ 6,200 $ 6,600 $ 7,500 $ 8,100
Gross Savings as a % of HAC Cost Pool 9.6% 18.5% 17.4% 15.3% 14.2%
<CAPTION>
HAC Consensus Adjustment
Adjust Retention Rate (Raytheon/HAC) 50.0% 40.0% 30.0% 25.0% 25.0%
Revised Change in EBT (Raytheon/HAC) $ 288 $ 460 $ 345 $ 288 $ 288 $ 1,668
Adjustment to EBT 136 117 (76) (106) (58) 14
</TABLE>
Notes:
Analysis as per HAC management, January 1997.
1997 represents 1/2 year.
29
<PAGE>
HAC Management Assessment
Cost Synergy
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------- Total
($ in millions) 1997 1998 1999 2000 2001 1997-2001
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Northrop Grumman Analysis (a)
Cost Reduction - Gross $393 $653 $770 $770 $770 $3,356
Change in EBT $199 $234 $294 $169 $121 $1,017
Implied Retention Rate 50.6% 35.8% 38.2% 21.9% 15.7%
Combined Target Cost Pool (Approx.)* $9,700 $10,400 $11,300 $12,800 $14,300
Gross Savings as a % of Target Cost Pool 4.1% 6.3% 6.8% 6.0% 5.4%
ESID/ESSD Cost Pool (Approx.) $3,700 $4,100 $4,600 $5,200 $6,100
Gross Savings as a % of Cost Pool 10.6% 15.9% 16.7% 14.8% 12.6%
HAC Consensus Adjustment
Adjust Cost Reduction $685 $685 $685 $685 $685 $3,425
Adjust Retention Rate 20.0% 20.0%
Revised Change in EBT $173 $245 $262 $137 $137 954
Adjustment to EBT ($26) $11 ($32) ($32) $16 ($63)
</TABLE>
Notes:
Analysis as per HAC management, January 1997.
*Estimated target cost pool consists of ESID, ESSD and Ruby.
30
