General Motors says it will decide during the next several months whether to spin off its valuable Hughes Electronics Corp. subsidiary in the USA.
Additionally, Hughes has hired Credit Suisse First Boston and Goldman Sachs & Co. to sort out potential bidders or partners for Hughes, according to American press reports.
GM is under pressure to unlock the value of Hughes, particularly now that corporate raider Carl Icahn has expressed an interest in GM.
A successful, tax-free spinoff of the Hughes satellite business would help silence GM's critics on Wall Street.
GM owns 100 percent of Hughes assets and controls the company. GM also owns 32 percent - worth $17 billion - of Hughes' tracking stock. The GM Class H tracking stock has rights to Hughes' profits.
Hughes' market capitalization - the number of Class H shares outstanding times price per share - is about $30.1 billion. GM's market capitalization is about $40 billion.
'I think [a Hughes spinoff] helps GM to focus on its core business in the automotive area,' said David Garrity, an automotive analyst with Dresdner Kleinwort Benson.
At the same time, GM needs to guarantee it will have first rights to future Hughes technology as it applies to automobiles, Garrity said.
GM revealed on August 18 that Icahn intended to buy more than $15 million worth but less than 15 percent of GM's common stock. However, GM spokeswoman Toni Simonetti said the company had been considering a Hughes spinoff months before the Icahn announcement.
In May, GM used its Class H stock to buy back more than 86 million shares of GM common stock, worth about $7.5 billion. It also contributed another $7 billion in Class H stock to its employee benefits plan.
But Wall Street analysts believe there is more value in spinning off Hughes completely. Although Hughes posted a net loss of $270.3 million in 1999, its attractive DirecTV satellite TV business has reportedly attracted the interest of such media giants as News Corp. and Walt Disney Co.
GM bought Hughes Aircraft Co., a defense electronics company, from Howard Hughes Medical Institute in 1985 for about $5 billion in cash and shares of the Class H stock.
Since then, GM has spun off Hughes' defense business and focused the subsidiary on commercial satellite technology.
Hughes also provided key technologies for GM's EV1 electric car and its OnStar in-vehicle communications system.