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GM Won’t Spin Off Hughes

February 1, 2000

DETROIT (AP) _ General Motors Corp. plans to issue $15 billion in new shares of the stock that tracks the performance of its Hughes Electronics unit in a bid to increase the value of GM shares, and denied it intends to spin off the high-flying Hughes.

GM said Tuesday it will offer its shareholders $8 billion in Hughes tracking stock in return for their regular GM shares. GM will also contribute $7 billion of Hughes’ stock to trust funds for retiree benefits.

``These actions enable GM to realize $15 billion of the value of Hughes, and improve GM’s financial flexibility to pursue business and growth initiatives in our automotive and financial services businesses,″ GM’s chairman, Jack Smith, said in a statement.

Hughes’ tracking stock reflects its financial performance, but does not represent any ownership stake in the company, which will remain a wholly owned subsidiary of GM.

The move will reduce the number of GM shares on the market, driving up GM’s earnings per share. The transaction will also reduce GM’s hoard of Hughes stock from 68 percent to 35 percent, or about $18 billion.

Wall Street analysts had been expecting some kind of move from GM on its Hughes stock for months, as Hughes enjoyed a strong run in a market hungry for technology businesses.

The former defense electronics specialist has become a leader in the satellite television business; its DirecTV service has 8 million subscribers. Hughes is also building a $1.4 billion wireless data network called Spaceway that it expects to unveil in 2003. The system will be marketed to home users and businesses to transmit data directly to other Spaceway users.

While GM has not been shy about selling or spinning off businesses, company leaders say they have no such plans for Hughes. GM has been looking at ways to squeeze more profits out of each vehicle by selling services such as Internet access, its OnStar security system or satellite radio _ all of which require expertise in wireless and satellite technology.

GM shares rose more than 2 percent, rising $1.75 to $82.31 1/2 a share Wednesday afternoon on the New York Stock Exchange, where GM’s Hughes’ shares were down 25 cents at $112.25.

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