The following story on Smart Money detail how GM's board will begin the process of spinning out its GMH interest. Any thoughts on what an independent GMH may mean to DISH?
smartmoney.com
February 1, 2000 1:47 PM
GM, in a Surprise, Leaves Dividend Unchanged
GENL MOTORS
GM 82.31
1.75 2.17%
GENL MOTORS CL'H'
GMH 112.25
-0.25 -0.22%
DJIA
10978.69 38.16
Nasdaq
4003.04 62.69
Rus. 2000
500.56 4.33
2/1/2000 1:54PM ET
NEW YORK -(Dow Jones)- The board of General Motors Corp. decided not to boost its quarterly dividend and announced plans to exchange part of its stake in its Hughes Electronics Corp. unit to buy back GM common stock and boost GM's pension fund.
The board of the No. 1 auto maker will exchange about $8 billion worth of Class H stock, which tracks the performance of Hughes, for GM common stock. Until Tuesday, GM had been mum on revamping its stake in Hughes (GMH) though there has been plenty of speculation over how a deal would be structured.
GM recently decided to sell the Hughes unit's satellite-making operations to aerospace giant Boeing Co. for $3.75 billion, one of several milestones GM executives had indicated were prerequisites to any spinoff of the Class H holdings, which represent a dividend interest in Hughes' performance.
Spinning off part of Hughes and applying part of the Hughes stake to its pension fund would enhance GM's bottom line in 2000, a prominent auto analyst said in advance of the board meeting. Goldman Sachs & Co.'s Gary Lapidus maintained his target of $100 a share for GM, which now trades at around $81. The analyst expects GM to earn $5.4 billion in 2000.
Contributing part of its Hughes stake to its postretirement pension fund and its reduced stake in Hughes' net loss would add about $900 million to GM's bottom line, he said.
Several months ago GM's board asked Hughes executives to prepare a detailed evaluation and valuation of each piece of Hughes and how the pieces would fit into various marketplaces if the company were spun off from GM.
GM's decision to sell Hughes trademark satellite-making operations makes Seattle-based Boeing - already the world's largest aerospace concern - the world's largest global producer of commercial satellites, as well. For Hughes, the sale means abandoning its manufacturing roots and becoming a leading provider of a broad range of global satellite services.
GM announced plans to contribute up to $7 billion of Class H stock to certain of its benefit plans in the second quarter, including a "significant" amount to its U.S. Hourly-Rate Employees Pension Plan, and the balance to its voluntary employees' beneficiary association, or VEBA, trust. The VEBA trust was set up in 1997 to fund the corporation's other post-retirement employee benefit, or OPEB, obligations for hourly employees.
The pension plan contribution will help to ensure that GM's U.S. pension plans remain fully funded for the foreseeable future, the company said. GM said the contributions to the benefit plans, which are not subject to any regulatory approvals, will significantly reduce annual pension and OPEB expense, and will strengthen the company's overall financial position.
GM will retain about a 35% stake, or $18 billion interest in Hughes. However, GM said it will continue to evaluate what Hughes ownership structure would be optimal for the two companies and GM stockholders.
Copyright (c) 2000 Dow Jones & Company, Inc.
All Rights Reserved.
|
