-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B1ORZ+MOzjZ4wD5r5FpC/fS22FL3QH0u/UAQKcCfl56K6JukA5Fs3X7Ysjnb+Lyx 2W5IM2sm/yXzPAuHlYBeMg== 0000909518-01-500490.txt : 20020412 0000909518-01-500490.hdr.sgml : 20020412 ACCESSION NUMBER: 0000909518-01-500490 CONFORMED SUBMISSION TYPE: 425 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20011205 GROUP MEMBERS: HUGHES ELECTRONICS CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 SEC ACT: 1934 Act SEC FILE NUMBER: 001-00143 FILM NUMBER: 1807290 BUSINESS ADDRESS: STREET 1: 300 RENAISSANCE CTR STREET 2: MAIL CODE: 482-C34-D71 CITY: DETROIT STATE: MI ZIP: 48265-3000 BUSINESS PHONE: 3135565000 MAIL ADDRESS: STREET 1: 300 RENAISSANCE CTR STREET 2: MAIL CODE: 482-C34-D71 CITY: DETROIT STATE: MI ZIP: 48265-3000 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 BUSINESS ADDRESS: STREET 1: 300 RENAISSANCE CTR STREET 2: MAIL CODE: 482-C34-D71 CITY: DETROIT STATE: MI ZIP: 48265-3000 BUSINESS PHONE: 3135565000 MAIL ADDRESS: STREET 1: 300 RENAISSANCE CTR STREET 2: MAIL CODE: 482-C34-D71 CITY: DETROIT STATE: MI ZIP: 48265-3000 425 1 a12-5gm425.txt 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 made available on Hughes' website beginning December 5, 2001: Credit Suisse First Boston Media Week Conference Jack Shaw President & Chief Executive Officer, HUGHES Eddy Hartenstein Chairman & Chief Executive Officer, DIRECTV December 5, 2001 [HUGHES LOGO] SEC Guidelines 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. General Motors and its directors and executive officers, Hughes and certain of its officers, and EchoStar and certain of its executive 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 regarding the participants and their interests in the solicitation was filed pursuant to Rule 425 with the SEC by each of GM and Hughes on November 16, 2001. 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 document 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 1 SEC Guidelines - Cont 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 ordifficult 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 document. 2 HUGES Overview -------------------------- | HUGHES | | | | 2001E Revenues ~ $8.3B | -------------------------- | |----------------------------|--------------------------| | | | - ------------------------ ------------------------ -------------------------- | | | HUGHES | | | | DIRECTV | | NETWORK SYSTEMS | | PanAmSat | |2001E Revenues ~ $6.3B| |2001E Revenues ~ $1.3B| | 2001E Revenues ~ $0.9B | - ------------------------ ------------------------ -------------------------- o United States o DIRECWAY o Transponder Leasing o Latin America - Consumer o DIRECTV Broadband - Enterprise o DIRECTV Receiver Equipment 3 HUGHES 2002 Guidance Increase from 2001 ------------------ HUGHES Revenue: $9.0-9.2B ~10% HUGHES EBITDA: $750-850M 50-90% Business Unit Highlights DIRECTV U.S. EBITDA Expected to More Than Double to $525-575M While Adding Over 1M New Subscribers DIRECTV Latin America Targeting EBITDA Break-even HNS' Broadband Products and Services Division is Expected to Grow Revenues by 20-25% While Reaching EBITDA Break-even PanAmSat is Targeting EBITDA Margin of 70% or Higher 4 DIRECTV U.S. - A Profitable Growth Strategy Increase Financial Returns While...Growing Our Subscriber Base [Chart showing DIRECTV Value Drivers, [Chart showing 9.5M in 2000, ~10.6M in which include Improve Margins, Increase 2001E and 11.6-11.8 in 2002E.] Subscriber Retention and Reduce SAC.] 5 Taking SAC Down SAC Reduction Initiatives o Eliminate Manufacturing Subsidies [Chart showing $575 in Q2 '01, $555 in Q3 '01, $560 in Q4 '01E and $525 in 2002E.] o Attacking Signal Piracy - "Out-of-Box" program - Activation-based retail model o Emphasize Less Expensive Distribution Channels 6 DIRECTV U.S. - Key Operational Objectives Reduce Churn Increase Margins o Acquiring Committed Long o G&A Savings Term Customers - Staff reductions - 12 month service commitment - $50M annual cost savings o New Incentive Plans with Retail Partners o Programming Margin Initiatives o More Stringent Credit - New program packages Screening Practices - New CRM (Customer o Significantly Improved Relationship Management) Customer Service and system Installations - Leverage large subscriber base to negotiate favorable terms 7 DIRECTV U.S. - New Strategies Result In Improved Financial Returns [Chart Showing Accelerating [Chart showing Increasing Subscriber EBITDA: $151M in 2000, IRRs(2): 41% in 1H '01, 43% in 2H '01E $200-250M(1) in 2001E, and 47% in 2002E.] and $525-575M in 2002E.] (1) Excludes one-time severance charge of $48M (2) Assumptions for 1H'01/2H'01/2002E: SAC: $555/$560/$525; Monthly Churn: 1.75%/1.70%/1.60%; ARPU: $55.50/$56.90/$56.00 8 DIRECTV - Latin America o Over 1.5M Subscribers [LOGO] 2002 o Exclusive Programming FIFA WORLD CUP KOREA JAPAN o World Cup Rights o Launched Interactive [LOGO] [LOGO] Services Disney Channel HBO Ole o Aggressive Cost and Churn Reductions o Targeting EBITDA Break-even in 2002 9 Hughes Network Systems [DIRECWAY LOGO] - One Platform That Leverages Both Enterprise and Consumer Markets Enterprises Consumers o World Marketshare Leader o ~100,000 Subscribers - 67% in 2000 o Focused on "Powered by o >300,000 VSAT Terminals DIRECWAY" Wholesale Model Installed in 85 Countries o Bundled with DIRECTV - Leading provider of DIRECTV set-top boxes [ARCO LOGO] [AOL LOGO] [GM LOGO] [PEGASUS COMMUNICATIONS LOGO] [CIRCUIT CITY LOGO] [DIRECTV LOGO] [BLOCKBUSTER LOGO] [EARTHLINK LOGO] [CHEVRON LOGO] [MOBIL LOGO] [BMW LOGO] [KMART LOGO] [JACK IN THE BOX LOGO] [FORD LOGO] [WALMART LOGO] 10 SPACEWAY: The Next Generation [Graphic of Satellite] o Service Launch in 2003 o Key Differentiators - Spot beam satellites - Peer-to-Peer architecture - Packet switching - Bandwidth-on-Demand o HUGHES Broadband Alliance Formed - Sun Microsystems and Polycom are first to join o Established Peer-to-Peer Application Center of Excellence SPACEWAY Will Deliver High-Speed, Low-Cost Multimedia Services to Both Consumers and Enterprises Beginning in 2003 11 PanAmSat New Leadership: 3-phase Strategy [Graphic of Earth with satellites (1) Refocus on core operations circling Earth and Ka-Band slots (2) Increase profitability noted intermittently.] (3) Grow revenues Key Financial Targets - Increase EBITDA margins to 70% or higher in 2002 - Decrease operating expenses by $25-30M per year - Reduce capital expenditures by ~$700M over 5 years VISION: To Be the Financially Strongest Premier Satellite Operator 12 [ECHOSTAR LOGO] [HUGHES LOGO] A Powerful Combination 13 Transaction Summary o HUGHES and EchoStar to Merge - EchoStar shareholders to receive about 1.37 HUGHES shares for each EchoStar share - Equivalent to 0.73 EchoStar shares per HUGHES share o Before the Merger, HUGHES Pays a Cash Dividend of Up to $4.2 Billion to GM Which Reduces GM's Retained Interest in HUGHES o Up to Six Months After the Closing, GM May Offer Up to 100 Million Shares of HUGHES Equity in Exchange for GM Debt Securities o Fully-Committed Financing Totaling $5.5 Billion 14 Pro Forma Economic Ownership ---------------- ------------------- | GM Class H | | EchoStar Public | | Shareholders | | Shareholders | ---------------- ------------------- 53% \ / 18% \ / \ / New Company (EchoStar) / \ / \ 11% / \ 18% ----------- ----------------- | General | | Charles Ergen | | Motors | | | ----------- ----------------- Note: Assumes $4.2 billion dividend paid to GM, and a corresponding reduction of GM's retained interest in HUGHES, at an illustrative price of $18.44 based upon the implied deal value. Does not include the offer of up to 100 million shares of HUGHES equity in exchange for GM outstanding debt. 15 Key Merger Synergies o Efficient Utilization of Scarce Spectrum o Reallocation of Approximately 350 Duplicate Channels o New Content and Services o Significant Cost Savings 16 DBS Satellites and CONUS(1) Orbital Slot Locations 119(degrees)WL 110(degrees)WL 101(degrees)WL DIRECTV-6 11 Frequencies DIRECTV-1 3 Frequencies DIRECTV 1-R 16 Frequencies EchoStar 2,4,6 21 Frequencies EchoStar 5 29 Frequencies DIRECTV-2 8 Frequencies DIRECTV-3 8 Frequencies
[Graphic of Earth and Satellites.] (1) CONUS stands for Continental United States 17 Channel Duplication EchoStar DIRECTV Channels Channels* Channels* Duplicated - -------------------------------------------------------------------------------- Basic(1) 122 116 99 Premium 34 31 28 Local Channels 155 173 145 Currently Carried(2) Other: PPV 24 50 24 Sports(3) 23 23 22 A la carte (4) 64 49 30 Total 421 441 347 - -------------------------------------------------------------------------------- *All channels are broadcast from CONUS satellites (1) Total Choice, America's Top100 (2) No Must-Carry Channels (3) Does not include professional and college sports packages (4) Includes Spanish-language channels, Adult, Family Pack and additional content in America's Top 150 18 Competitive Benefits of the Merger o Increased Competition with Cable - Cable still has ~80% of the U.S. multichannel subscribers - Cable continues to increase prices each year (37% since 1996 vs. CPI of 10%) - On-going cable industry consolidation - Digital cable and bundled broadband offering increasingly threatens DBS o More Services, More Choices and Competitive Prices - Local channels covering approximately 85% of TVHH population (versus 60% today) - More High Definition TV channels - Expanded services: interactive, ethnic, video-on-demand, sports and news - Nationwide broadband services at affordable prices 19 Providing More Local and HDTV Channels - -------------------------------------------------------------------------------- Before Merger - -------------------------------------------------------------------------------- Total Channels % of # of Used for Local(1) Population HDTV Channels ----------------- ---------- ------------- DIRECTV ~450 61% 2 EchoStar ~400 58% 3 After Merger New Co(2) 850 85% 12 - -------------------------------------------------------------------------------- The New Company Will Provide Local Channels to More Than 85% of TVHHs (Versus Around 60% for 2 Separate Companies) and Will Be Able to Offer Many New HD Channels to Meet Growing Consumer Demand (1) Assumes Must-Carry environment (2) Assumes minimum post merger local channel offering and population coverage with reallocation of channels duplicated 20 Benefits to Rural America o Greater Availability of Digital Quality Local Channels o National Pricing Which will be Competitive Against Cable o More Services Offered at a Single National Price - New Content - High Definition TV - Interactive - Video-on-demand - Specialty - Foreign language o Improved Broadband Services - Affordable pricing - Expanded services 21 Potential Synergies of The Merger --------------------- 2005 EBITDA Estimates --------------------- Revenue Synergies Cost Synergies [Pie chart showing [Pie chart showing Advertising $900-1,000M, SAC $900-1,200M, Broadband $250-300M, G&A $400-450M, HDTV $50-100M, Programming $600-700M, VOD/PPV $75-125M, Churn $750-850M, Local Services $700-800M, Subtotal: $2.65-$3.2B] Subtotal: $1.975-2.325B] 22 There Are Approximately 92 Million Multichannel Subscribers in the U.S. - -------------------------------------------------------------------------------- Cable DBS Other* (YE Est.) - -------------------------------------------------------------------------------- AT&T 15.1 DIRECTV 8.5 3.3 Time Warner 13.2 NRTC/Pegasus 1.8 Comcast 7.9 EchoStar 6.4 Charter 7.0 Cox 6.2 Adelphia 5.7 Cablevision 3.0 Other 13.6 71.7M 16.7M 3.3M - -------------------------------------------------------------------------------- Proposed Company Would Represent Approximately 18% of the Total U.S. Multichannel Subscriber Marketplace Source: Cablevision Magazine Website as of 10/01/01; SkyReport 9/30/01; Deutsch Bank Report 9/6/01 *Other includes C-band, MMDS, SMATV and over-builders 23 Regulatory Overview Market Definition - Relevant Points - ----------------------------------- o FCC's Original Allocation of DBS Spectrum Designed to Provide Competition with Cable Monopoly o SHVIA Enacted to Help DBS Compete with Cable o In the 1998 Primestar/News Corp/MCI Cases, DOJ and FCC Defined Market to be Multichannel Video Programming Distribution (MVPD) - DOJ concluded that DBS and cable were in same market - FCC endorsed DBS mergers so that DBS could better compete against cable o DBS Focuses their Advertising/ Promotions on Cable; Much of Cable's Advertising Attacks DBS 24 Regulatory Overview Market Concentration - Relevant Points - -------------------------------------- o The 2001 Heinz Case Held That Substantial Merger-Specific Efficiencies Could Outweigh an Increase in Concentration o Merger Spectrum Efficiencies Will Result in Extraordinary and Verifiable Increase in Output - The addition of local channels, HDTV, ethnic services, expanded broadband services, etc. will increase the options for MVPD viewers - The merger efficiencies cannot be achieved without combining EchoStar and HUGHES o No Likelihood of Collusion as DBS Competes Against Many Local Cable Monopolies 25 GMH Shareholder Protections o HUGHES Will Absolutely Manage the Business in an Aggressive and Effective Fashion - HUGHES management to remain totally focused on running the business o Cash Available if Regulatory Approval is Not Received - $600M fee paid to HUGHES by EchoStar - EchoStar to purchase PanAmSat for ~$2.7B - Potential for GMH spin-off in the future o Continued Use of the DIRECTV Brand Name in Any Event 26 A Powerful Combination o 100% Digital Nationwide Platform With More Than 16.7 Million Subscribers (Including 14.9 Million Owned-and-Operated) o Creates Stronger Competitor to Large, U.S. Cable and Broadband Providers o 100 Million U.S. Households Offer Powerful Growth Opportunity o Leverages Already Compelling DBS Economics o Substantial Cost and Revenue Synergy Opportunities o Superior Management Team with Proven Success 27 -----END PRIVACY-ENHANCED MESSAGE-----