Filed by General Motors Corporation
Subject Company - General Motors Corporation
and Hughes Electronics Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and Deemed Filed Pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Commission File No.: 001-00143
The following is a form of letter sent to DIRECTV retailors.
DIRECTV LOGO
October 31, 2001
Dear [Account Name Here]:
As you know by now, General Motors and EchoStar Communications agreed to merge
Hughes Electronics - owner of DIRECTV and Hughes Network Systems and principal
shareholder of PanAmSat and DIRECTV Latin America - with EchoStar Communications
Corporation, owner of the DISH Network.
The combined company would have 14.9 million customers, with another 1.8 million
being served by the National Rural Telecommunications Cooperative (NRTC) and
affiliates. The merged DIRECTV/EchoStar will create a powerful national media
company and one of the largest multichannel video providers in the country that
will be an even more formidable competitor to cable. The new company will also
help bridge the digital divide in vast areas of the United States that have no
access to broadband communications.
As an important distribution partner, you should know what while the newly
merged company will be known as EchoStar, the powerful DIRECTV brand that is so
familiar to your customers will be retained for the service offering. Similarly,
while no decision has been made regarding the technical platform to be utilized
going forward, both parties are committed to ensuring that no consumer will
experience disruption of service or additional expense, regardless of the
platform they have selected. In short, our mutual objective of aggressively
promoting the DIRECTV service is unchanged.
This new entity, carrying the blue DIRECTV banner, will open up new sales
opportunities and provide a compelling new suite of services to offer your
customers. The merged company will have a powerful capability to provide
tremendous benefits to our customers, including increased bandwidth to
significantly increase both the number of local channel markets served and the
array of high definition programming made available nationwide.
You should be aware that it will take several months to obtain the necessary
approvals from shareholders and government agencies. In the meantime, it is
critical that we continue our full court press to meet our respective business
goals and provide the highest levels of customer service and satisfaction before
and after this merger closes.
I've attached the press release that provides additional details of the
agreement. If you have questions, please feel free to call me. We'll of course
keep you posted on the progress of the merger.
Thanks for your continued support of DIRECTV.
Sincerely,
[Account Manager Name Here]
DIRECTV, Inc.
GM'S HUGHES ELECTRONICS TO MERGE WITH ECHOSTAR COMMUNICATIONS
o Stockholders and Consumers Benefit As Combined Hughes-EchoStar
Provides Meaningful Competitor To Cable TV Companies
NEW YORK -- General Motors Corp. and its subsidiary Hughes Electronics
(NYSE: GM, GMH) together with EchoStar Communications Corporation (NASDAQ:
DISH), today announced the signing of definitive agreements that provide for the
spin-off of Hughes from GM and the merger of Hughes with EchoStar.
The combined company would use the EchoStar name and adopt the DIRECTV
brand for its services and related products. The merger would create the
nation's second-largest pay television platform with more than 16.7 million
subscribers, of which 1.8 million subscribers are National Rural
Telecommunications Cooperative (NRTC) and affiliates, and 14.9 million
subscribers are owned-and-operated by the combined company. Cable TV companies
presently control more than 80 percent of the U.S. pay television market, while
a combined EchoStar-Hughes would provide service to about 17 percent of the
market.
The spin-off of Hughes from GM would result in current holders of Class
H common stock receiving one share of new Hughes Class C common stock in
exchange for each share of Class H stock held prior to the spin-off. The merger
of Hughes and EchoStar would result in Hughes being the surviving entity and
taking the name EchoStar Communications Corp. Holders of Class A EchoStar common
stock prior to the merger would receive 1.3699 shares of the new EchoStar in
exchange for each share of Class A EchoStar common stock held prior to the
merger. Based on the closing price of EchoStar common stock of $25.26 on Oct.
26, 2001, the transaction would provide a value of approximately $18.44 per GMH
share, representing a 20-percent premium. As of Oct. 26, 2001, the implied
market capitalization of Hughes was approximately $21.3 billion and the market
capitalization of EchoStar was approximately $12.1 billion.
The transaction is expected to require approximately $5.5 billion of
total financing, which EchoStar expects to fund in the capital markets prior to
closing. Completion of this financing has been backstopped by a bridge
commitment of approximately $2.75 billion from Deutsche Bank, and a bridge
commitment of approximately $2.75 billion from General Motors, the latter of
which the parties plan to replace with a commitment from one or more other
leading financial institutions in the near future. The GM bridge commitment is
secured by a pledge of $2.75 billion of EchoStar stock held by a trust
controlled by EchoStar Chairman and Chief Executive Officer Charles Ergen.
The transaction is subject to a number of conditions, including
approval by a majority of each class of GM shareholders - GM $1-2/3 and GM Class
H - voting both separately as distinct classes, and also together as a single
class. Approval of the majority of EchoStar's voting shares has already been
given by written consent. The proposed transaction also is subject to regulatory
clearance under the Hart-Scott-Rodino Act and approval by the Federal
Communications Commission. The transaction is also contingent upon the receipt
of a favorable ruling from the Internal Revenue Service that the separation of
Hughes from GM will qualify as a tax-free spin-off for U.S. Federal Income Tax
purposes. The transaction is currently expected to close in the second half of
2002.
"This transaction provides significant benefits to Hughes, EchoStar,
millions of present and future DIRECTV customers, and shareholders of both GM
and EchoStar," said GM President and Chief Executive Officer Rick Wagoner.
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"We've said all along that we wanted to structure an agreement that would
provide continued strong growth at Hughes and maximum value for both GM and GM
Class H shareholders. This transaction achieves these objectives."
Strong Growth Prospects and Significant Synergies
"This is an extremely compelling combination for GM, GMH and EchoStar
shareholders," Ergen said. "The combination of EchoStar and Hughes is expected
to generate very substantial synergies utilizing the advantages of
direct-broadcast satellite television, cost savings from the elimination of
costly duplicate satellite bandwidth and infrastructure, and strong management
offering more effective fundamental business practices. The new company would
also have enhanced scale to compete more effectively against the dominant U.S.
cable and broadband providers - a critical factor given increasing consolidation
in the cable industry."
"U.S. consumers also would benefit from the combined company's ability
to increase significantly the number of markets served with local channels via
satellite, provide additional channel offerings, increase high-definition TV
(HDTV) offerings and accelerate the introduction of next-generation high-speed
Internet services," Ergen continued. "Together, EchoStar's DISH Network and
Hughes' DIRECTV also can provide a range of services that would bridge the
`digital divide' - providing high-speed broadband solutions to consumers and
businesses. Importantly, these services would be available in rural areas
otherwise far from the information superhighway at rates which the company is
prepared to assure regulators would be competitive."
"Hughes and its operating companies would be well positioned to thrive
as part of this merged company," said Jack A. Shaw, chief executive officer of
Hughes. "DIRECTV would enjoy significant cost efficiencies and better use of its
assets. Hughes Network Systems would play a key strategic part in the growth of
satellite-delivered broadband. PanAmSat would have continued growth
opportunities. And DIRECTV Latin America would benefit from the synergies of the
larger combined company," Shaw said.
The new company, which would retain the EchoStar name but would use the
DIRECTV brand for consumer offerings, would be based in Littleton, Colo., and
would employ approximately 20,000 people and serve more than approximately 14.9
million direct-broadcast satellite TV customers. EchoStar and Hughes have
pledged that the merger would not cause disruption of service or additional
expense to existing customers of either DIRECTV or DISH Network service.
The new EchoStar would be led by Ergen as chairman and chief executive
officer. The board of directors would consist of nine members, five of whom
would be independent directors.
Ergen added, "I think it is significant that EchoStar and Hughes have
agreed to a fair and balanced process for identifying the most qualified people
from both companies in order to select the best person for every job, regardless
where they worked prior to the merger. This is a key provision that Hughes
management felt strongly about and to which EchoStar readily agreed."
A transition team made up of Shaw and DIRECTV Chairman and CEO Eddy
Hartenstein from Hughes, as well as Ergen and EchoStar President Michael Dugan
will assure a smoother and orderly process.
Significant Proceeds for GM
As part of the transaction, General Motors would receive up to $4.2
billion in cash for redemption of part of its economic interest in Hughes. Pro
forma for the cash redemption (assuming illustratively a price of $18.44 based
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on the implied deal value), GM Class H shareholder would own approximately 53
percent of the combined company, EchoStar's shareholders would own approximately
36 percent, and GM would own approximately 11 percent. In addition, prior to the
transaction, GM would seek to exchange up to 100 million shares of GM Class H
common stock (or after the transaction 100 million shares of EchoStar common
stock) for GM outstanding debt, which would further improve GM's net liquidity
position.
"This transaction offers substantial financial benefits now and over
the long term for GM $1-2/3 and GM Class H shareholders," Wagoner said. "GM
Class H shareholders would receive a significant premium on their investment.
For GM $1-2/3 shareholders, GM expects to receive $4.2 billion in cash, and
would retain a significant investment in the merged company."
GM intends to file a registration statement in connection with the
transaction and mail a proxy statement/prospectus to both GM and GM Class H
stockholders in connection with the transaction. Investors are urged to read the
proxy statement/prospectus when it becomes available because it will contain
important information about GM, Hughes and the transaction.
EchoStar Communications Corp. and its DISH Network provide
state-of-the-art direct-broadcast satellite TV service that is capable of
offering over 500 channels of digital video and CD-quality audio programming, as
well as advanced satellite TV receiver hardware and installation. EchoStar is
included in the Nasdaq-100 Index (NDX). DISH Network currently serves over 6.43
million customers. For more information, visit www.dishnetwork.com.
HUGHES is the world's leading provider of digital television
entertainment, broadband services, satellite-based private business networks and
global video and data broadcasting.
Hughes Network Systems, a unit of Hughes Electronics Corporation, is
the world's leading provider of broadband satellite network solutions for
businesses and consumers, with over 400,000 one- and two-way systems installed
in more than 85 countries. Headquartered in Germantown, Maryland, USA, HNS
maintains sales and support offices worldwide. To learn more about HNS and
DIRECWAY, please visit www.hns.com or www.direcway.com.
DIRECTV is the nation's leading digital satellite television service
provider with more than 10 million customers. DIRECTV and the Cyclone Design
logo are trademarks of DIRECTV, Inc., a unit of Hughes Electronics Corporation.
Visit DIRECTV on the World Wide Web at DIRECTV.com.
General Motors, the world's largest vehicle manufacturer, designs,
builds and markets cars and trucks worldwide. In 2000, GM earned $5 billion on
sales of $183.3 billion, excluding special items. It employs about 372,000
people globally. GM also operates one of the largest and most successful
financial services companies, General Motors Acceptance Corp. (GMAC), which
offers automotive, mortgage and business financing and insurance services to
customers worldwide. GM is investing aggressively in digital technology and
e-business within its global automotive operations and through such initiatives
as e-GM, GM BuyPower, and OnStar. More information on General Motors can be
found at www.gm.com.
# # #
In connection with the proposed transactions, General Motors, Hughes
and EchoStar intend to file relevant materials with the Securities and Exchange
Commission, including one or more Registration Statement(s) on Form S-4 that
contain a prospectus and proxy/consent solicitation statement. Because those
documents will contain important information, holders of GM $1-2/3 and GM Class
H common stock are urged to read them, if and when they become available. When
filed with the SEC, they will be available for free at the SEC's website,
www.sec.gov, and GM stockholders will receive information at an appropriate time
on how to obtain transaction-related documents for free from General Motors.
Such documents are not currently available.
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General Motors, and its directors and executive officers, and Hughes,
and certain of its officers, may be deemed to be participants in GM's
solicitation of proxies or consents from the holders of GM $1-2/3 common stock
and GM Class H common stock in connection with the proposed transactions.
Information about the directors and executive officers of GM and their ownership
of GM stock is set forth in the proxy statement for GM's 2001 annual meeting of
shareholders. Participants in GM's solicitation may also be deemed to include
the following persons whose interests in GM are not described in the proxy
statement for GM's 2001 annual meeting:
John M. Devine Vice Chairman and CFO, General Motors
Jack A. Shaw Chief Executive Officer, Hughes
Roxanne S. Austin Executive VP, Hughes; President and COO, DIRECTV
Eddy W. Hartenstein Senior Executive VP, Hughes; Chairman, DIRECTV
Michael J. Gaines Corporate VP and CFO, Hughes
Mr. Devine beneficially owns 139,204.80 GM $1-2/3 shares and 27,177 GM
Class H shares. Mr. Shaw beneficially owns 3,604 GM $1-2/3 shares and 1,415,915
GM Class H shares. Ms. Austin beneficially owns 2,804 GM $1-2/3 shares and
860,454 GM Class H shares. Mr. Hartenstein beneficially owns 2,622 GM $1-2/3
shares and 1,138,899 GM Class H shares. Mr. Gaines beneficially owns 337 GM
$1-2/3 shares and 165,329 GM Class H shares. The above ownership information
includes shares that are purchasable under options that are exercisable within
60 days of October 15, 2001. In addition, Mr. Devine holds options to acquire
shares of GM $1-2/3 common stock that are not exercisable within 60 days of
October 15, 2001, and each of Mr. Shaw, Ms. Austin, Mr. Hartenstein and Mr.
Gaines holds options to acquire shares of GM Class H common stock that are not
exercisable within 60 days of October 15, 2001.
Each of Mr. Shaw, Ms. Austin, Mr. Hartenstein and Mr. Gaines has a
severance agreement with Hughes that provides for severance in the event of an
involuntary termination after a change in control, and each also has a retention
agreement that provides for certain payments in the event of a change in
control.
EchoStar and certain of its executive officers may be deemed to be
"participants" in GM's solicitation of consents from the holders of GM $1-2/3
and GM Class H shares in connection with the proposed transactions. Information
about the executive officers of EchoStar is set forth in the proxy statement for
EchoStar's 2001 annual meeting of shareholders. As of Oct. 28, 2001, EchoStar
held approximately 1,000 shares of GM $1-2/3 common stock and 185,000 shares of
GM Class H common stock. Mr. Ergen beneficially owns approximately 1,000 shares
of GM $1-2/3 common stock and approximately 10,000 of GM Class H common stock.
Investors may obtain additional information regarding the interests of
the participants by reading the prospectus and proxy/consent solicitation
statement if and when it becomes available.
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended.
Materials included in this filing contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause our actual results to be materially different
from historical results or from any future results expressed or implied by such
forward-looking statements. The factors that could cause actual results of
General Motors Corp. ("GM"), EchoStar Communications Corporation ("EchoStar"),
Hughes Electronics Corp. ("Hughes"), or a combined EchoStar and Hughes to differ
materially, many of which are beyond the control of EchoStar, Hughes or GM
include, but are not limited to, the following: (1) the businesses of EchoStar
and Hughes may not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected; (2) expected benefits and
synergies from the combination may not be realized within the expected time
frame or at all; (3) revenues following the transaction may be lower than
expected; (4) operating costs, customer loss and business disruption including,
without limitation, difficulties in maintaining relationships with employees,
customers, clients or suppliers, may be greater than expected following the
transaction; (5) generating the incremental growth in the subscriber base of the
combined company may be more costly or difficult than expected; (6) the
regulatory approvals required for the transaction may not be obtained on the
terms expected or on the anticipated schedule; (7) the effects of legislative
and regulatory changes; (8) an inability to obtain certain retransmission
consents; (9) an inability to retain necessary authorizations from the FCC; (10)
an increase in competition from cable as a result of digital cable or otherwise,
direct broadcast satellite, other satellite system operators, and other
providers of subscription television services; (11) the introduction of new
technologies and competitors into the subscription television business; (12)
changes in labor, programming, equipment and capital costs; (13) future
acquisitions, strategic partnership and divestitures; (14) general business and
economic conditions; and (15) other risks described from time to time in
periodic reports filed by EchoStar, Hughes or GM with the Securities and
Exchange Commission. You are urged to consider statements that include the words
"may," "will," "would," "could," "should," "believes," "estimates," "projects,"
"potential," "expects," "plans," "anticipates," "intends," "continues,"
"forecast," "designed," "goal," or the negative of those words or other
comparable words to be uncertain and forward-looking. This cautionary statement
applies to all forward-looking statements included in this filing.
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