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Non-Tech : GM - General Motors -- Ignore unavailable to you. Want to Upgrade?

To: Time Traveler who wrote (178)	1/26/1999 9:28:00 PM
From: porcupine --''''>	Read Replies (2) \| Respond to of 543

GM board reviewing Hughes spin-off -- analysts By Michael Ellis DETROIT, Jan 25 (Reuters) - General Motors Corp.'s board of directors, in what would be another step to boost shareholder value, is considering a distribution of shares in its highly profitable Hughes Electronics Corp. telecommunications company, analysts said. GM's 74 percent share of El Segundo, Calif.-based Hughes, which analysts value at more than $13 billion, is unreflected in the automaker's share price. GM could tap the full worth of Hughes and reward shareholders with a distribution or a spinoff, they said. "The indications I've gotten is, yes, it is being reviewed," said David Garrity, principal of GVA Research in New York. "I would say over the next 18 months that some restructuring of Hughes occurs," in order to enhance shareholder value, he added. Another analyst, who declined to be named, said he also understood from company insiders that the board was again studying its stake in Hughes, whose satellite, telecommunications equipment and DirecTV broadcast service contributed $119 million in profits to GM in the fourth quarter. "My understanding is that sometime in the last few weeks, a decision was made to review it again," the analyst said. The initiative is in keeping with GM's record over the past several years of consolidating its automotive operations and selling or spinning off non-core businesses in order to enrich shareholders. GM spokesman Jim Finn said that top GM executives agree that Hughes is undervalued by Wall Street, but he declined to comment on the board's activities. He added the automaker needs to keep Hughes to become a leader in the emerging business of in-vehicle communications such as navigational and entertainment systems. "Retaining GM Hughes is in the best interests of GM and its shareholders," Finn said. However, analysts said that GM could continue to work with Hughes on future electronic applications for cars and trucks as independent partners. Hughes could also market those products to other automakers. A Hughes spinoff would add about $17 to the value of GM's shares, analyst David Bradley of J.P. Morgan Securities said. "The single biggest windfall for GM shareholders waiting to happen is Hughes," Bradley said. "I think the probability of it happening in the next several years is very high." GM acquired Hughes in 1985 for $5 billion. Former Chairman Roger Smith bought the company in part to transfer sophisticated defense electronics technology to everyday automobiles. In a massive move called "Project Triple Play", GM restructured Hughes in 1997 by selling the unit's defense electronics businesses to Raytheon Co. , merging Hughes' Delco Electronics business with GM's Delphi Automotive unit, and injecting capital into Hughes' remaining businesses. In the process, Hughes pared its businesses to focus on communications. Last Friday, Hughes bought the satellite operations of rival PRIMESTAR, Inc., for about $1.82 billion. GM shareholders were given a $2.4 billion stake in Raytheon and additional benefits under that deal. As part of the complicated transaction, GM recapitalized its Class H shares, which represents a 25.6 percent tracking-stock interest in the earnings of Hughes. In another boost to shareholders, GM said last week it would resume its $9 billion share buyback program, which has resulted in the repurchase of more than $6.3 billion of its own stock since January, 1997. GM is preparing to spin off in a public stock offering 17.7 percent of its stake this quarter in parts company Delphi Automotive, and distribute the remaining 82.3 percent to shareholders later this year. In a filing last week with the U.S. Securities and Exchange Commission, GM and Delphi disclosed the 1998 bonuses paid to top officers would be cut because of lower Delphi earnings. Delphi officials are scheduled to present the IPO to potential investors this week in what is known as a "road show." ((Detroit newsroom, 313-870-0200))