Filed by General Motors 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
Subject Companies: General Motors Corporation
Commission File No. 001-00143
Hughes Electronics Corporation
Commission File No. 000-26035
The following message was sent to all Hughes Electronics Corporation and
PanAmSat Corporation employees by Jack Shaw, president and chief executive
officer of Hughes:
May 2, 2003
To HUGHES and PanAmSat employees:
Today, General Motors, HUGHES and News Corp. filed our "Consolidated Application
of Authority to Transfer Control" with the Federal Communications Commission
(FCC). We also made our Hart-Scott-Rodino filing with the U.S. Department of
Justice. In addition, the tax ruling request has been filed with the Internal
Revenue Service. This means we have initiated the necessary processes to obtain
U.S. government approvals and clearances for our transaction with News Corp. We
are hopeful that these reviews will be completed by the end of the year.
I've attached the executive summary from our FCC filing for your information. If
you would like to read the entire document, it will be available on HUGHES.com.
In upcoming weeks, various congressional hearings are expected to be held that
may include discussion of our transaction. As in the past, we will post key
testimony on HUGHESNet. Work has also begun on the Proxy Statement, which will
be mailed to all GM stockholders (GM and GMH) at the time of solicitation of the
shareholder vote on this transaction.
We are making good progress through the steps necessary to complete the
transaction. I will keep you updated as we reach important milestones, and we
will continue to answer your questions through Transition News and your employee
intranet.
Sincerely,
Jack
In connection with the proposed transactions, General Motors Corporation ("GM"),
Hughes Electronics Corporation ("Hughes") and The News Corporation Limited
("News") intend to file relevant materials with the Securities and Exchange
Commission ("SEC"), including one or more registration statement(s) that contain
a prospectus and proxy/consent solicitation statement. Because those documents
will contain important information, holders of GM $1-2/3 common stock 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 (along with any other
documents and reports filed by GM, Hughes or News with the SEC) 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
GM. Such documents are not currently available.
GM and its directors and executive officers and Hughes and certain of its
executive officers may be deemed to be participants in the 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 2003 annual meeting of shareholders.
Participants in GM's solicitation may also be deemed to include those persons
whose interests in GM or Hughes are not described in the proxy statement for
GM's 2003 annual meeting. Information regarding these persons and their interest
in GM and/or Hughes was filed pursuant to Rule 425 with the SEC by each of GM
and Hughes on April 10, 2003. Investors may obtain additional information
regarding the interests of such 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 any securities, 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 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 GM,
Hughes and News to differ materially, many of which are beyond the control of
GM, Hughes or News include, but are not limited to, the following: (1) 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; (2) the
regulatory approvals required for the transaction may not be obtained on the
terms expected or on the anticipated schedule; (3) the effects of legislative
and regulatory changes; (4) an inability to retain necessary authorizations from
the FCC; (5) 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; (6) the introduction of new
technologies and competitors into the subscription television business; (7)
changes in labor, programming, equipment and capital costs; (8) future
acquisitions, strategic partnerships and divestitures; (9) general business and
economic conditions; and (10) other risks described from time to time in
periodic reports filed by GM, Hughes or News with the SEC. 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.
SUMMARY
For over two decades, Hughes Electronics Corporation ("Hughes") and
its subsidiaries have been at the forefront in developing, introducing and
deploying innovative satellite services for both businesses and consumers in the
United States. For example, Hughes was the first to launch a high-power Direct
Broadcast Satellite ("DBS") service, the first to launch a high-speed satellite
Internet access service, and the first to launch a DBS spot beam satellite. Such
innovations have spurred other satellite and terrestrial service providers to
upgrade their systems and improve their services, all to the benefit of American
consumers.
But now, as the satellite services industry moves into a more mature
stage, Hughes and its parent, General Motors Corporation ("GM"), find themselves
at a crossroads. DIRECTV faces intense competition from other multichannel video
programming distribution ("MVPD") systems. In fact, its DBS rival, EchoStar, is
growing faster than DIRECTV, while the number of digital cable subscribers
recently has been forecast to surpass the total number of DBS subscribers for
the first time. Hughes is also planning to roll out an advanced broadband
satellite system targeted to enterprise customers - a bold initiative that
presents enormous challenges. Thus, this is a critical juncture for Hughes if it
is to realize its full potential as a robust competitor that will offer
Americans a true alternative to established and well-financed incumbents.
For GM, the economic imperatives are very different. GM is world
renowned as a leader in the automotive industry, and seeks to focus its
management and capital resources on this core area of its operations, and the
need to provide funding for GM's U.S. pension plans and retiree health care
benefits for the employees who have supported GM's core automotive operations.
Separation of Hughes from GM will end the era of Hughes competing for capital
against the core automotive operations of GM. GM has no special expertise in the
businesses in which Hughes operates and GM's continued ownership will not
enhance Hughes' position as a dynamic force. Thus, for several years, GM has
been searching for an investor with a core competency more aligned with Hughes'
businesses and a willingness to permit Hughes to undertake strategic initiatives
that may require additional capital and other resources.
The News Corporation Limited ("News Corp.") has a strategic vision,
expertise and resources that will enable Hughes to reach its full potential as a
leader in MVPD services. Accordingly, through a series of related transactions
described in more detail below, GM will split off Hughes as an independent,
publicly traded company, and News Corp. will acquire a 34% interest in Hughes
which News Corp. will hold through Fox Entertainment Group, Inc. ("FEG"), in
which News Corp. currently holds an 80.6% equity interest and exercises 97% of
the vote.
News Corp. brings an impressive array of capabilities to the
transaction. It holds interests in a number of satellite direct-to-home ("DTH")
television platforms outside the United States, which will allow it both to
share with Hughes the benefits of its experience with diverse service offerings
and business practices and to achieve economies of scope and scale in research
and development and equipment production. News Corp. also has a proven track
record of innovation, a demonstrated ability to challenge established incumbents
successfully, and a tradition of changing the dynamic in markets it chooses to
enter. For example, in launching the FOX network, Fox News Channel, Fox Sports
Net, and National Geographic Channel, and investing heavily in establishing
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local news services in its owned television stations where none previously
existed, News Corp. not only aggressively entered areas dominated by formidable
incumbents, but also demonstrated a long-term commitment to compete in those
areas - and ultimately its ability to do so successfully. In addition, News
Corp. has demonstrated its willingness to invest in breakthrough technologies to
offer subscribers better services, as it did in converting the British Sky
Broadcasting ("BSkyB") platform from analog to digital technology and in
bringing a wide range of interactive television services to BSkyB subscribers.
News Corp. will bring this same level of strategic vision, energy, expertise and
innovation to Hughes. And because Hughes' satellite platforms serve the entire
country, the benefits of these enhanced services will flow to all Americans,
including those in rural and other areas currently underserved or unserved by
terrestrial alternatives.
News Corp. is committed to dramatically increasing DIRECTV's
local-into-local commitment by providing local-into-local service in as many of
the 210 Designated Market Areas nationwide as possible, and to doing so as soon
as economically and technologically feasible. Among the possibilities being
studied are the use of capacity on HNS' recently expanded North American Ka-band
SPACEWAY system, further incorporating digital terrestrial tuners into set-top
boxes so that subscribers can seamlessly integrate digital over-the-air signals,
and other emerging technologies. News Corp. also intends to investigate new
technologies that promise to improve spectrum efficiency, some of which are
already being used by News Corp. subsidiaries. Such initiatives not only will
improve DIRECTV's competitive position in a number of markets, but also will
help DIRECTV carry a greater array of high definition television ("HDTV")
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programming, thereby helping to drive the digital television transition process.
By bringing together News Corp.'s DTH experience, spirit of
innovation and programming expertise, with DIRECTV's video distribution
capabilities and Hughes Network Systems' technological capabilities, News Corp.
currently expects that, within three years, the transaction will create
synergies and efficiencies of between $610 million and $765 million annually.
These savings will, in turn, enhance Hughes' ability to undertake the
significant risks and costs of developing and deploying new services and
technologies to provide its customers with consistently more compelling products
and services.
Moreover, because the assets and operations of News Corp. and Hughes
are almost entirely complementary, the transaction will not decrease competition
in any relevant market affecting the United States. Indeed, competition will be
intensified and consumers will have more choice.
While the Commission has in the past recognized the pro-competitive
benefits of vertical integration of programming and distribution assets, it has
also assessed the potential for abuse. There is no opportunity for abuse as a
result of the proposed transaction. News Corp. has no market power in the
programming market and DIRECTV has no market power in the MVPD market that
either could leverage for anti-competitive purposes. Moreover, as a programmer,
News Corp. is dedicated to achieving the widest possible distribution for its
programming in order to maximize revenue from advertising and subscriber fees,
and it has no interest in denying access to or discriminating against any MVPD
platform. As a provider of subscription programming services to the public,
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DIRECTV is dedicated to securing the most compelling programming available,
regardless of the source.
Nonetheless, in order to allay any program-related concerns
whatsoever, News Corp. and Hughes have agreed as a provision of their
transactional documents that they will consent to the imposition of a series of
program access undertakings as a condition of approval of this Application.
>> First, News Corp. and Hughes will agree to operate under the
same program access rules that Congress and the Commission
have placed on programmers that are affiliated with cable
operators, even though in this case there is neither a history
of anti-competitive conduct nor the dominant market share that
engendered the program access requirements in the first place.
This commitment will remain in place whether or not News Corp.
is otherwise legally subject to the Commission's program
access rules. Accordingly, News Corp. will continue to make
its programming available to all MVPDs on non-discriminatory
prices, terms and conditions.
>> Second, News Corp. and Hughes will agree to a number of other
restrictions that go beyond those applicable to
cable-affiliated programmers and DBS operators. These
restrictions would, for example, (1) preclude News Corp. from
offering any of its existing or future national or regional
programming services on an exclusive basis to any MVPD, (2)
preclude News Corp. and DIRECTV from discriminating against
unaffiliated programming services in the selection, price,
terms, or conditions of carriage, and (3) preclude News Corp.
and DIRECTV from entering into exclusive arrangements with or
unduly or improperly influencing affiliated programming
entities, including Liberty Media Corporation. (A complete
list of these undertakings is attached to this Application as
Attachment G.)
These undertakings would remain in place for so long as the Commission's program
access rules remain in effect and News Corp. holds an attributable interest in
DIRECTV. The parties encourage the Commission to adopt these undertakings as a
condition of the approval of this Application. With these prophylactic measures
in place (and indeed even without them), the proposed transaction does not
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present even the potential for public interest harms that could offset the
inherent and undeniable public interest benefits.
Accordingly, the Commission should grant this Application
expeditiously so that the parties can begin as quickly as possible the process
that will enhance Hughes' capabilities and bring the benefits of more robust
competition to consumers throughout the United States.
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