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GM to spin off Delphi
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April 12, 1999: 5:12 p.m. ET
Automaker will divest its remaining stake through shareholder dividend
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NEW YORK (CNNfn) - General Motors Corp.'s board voted Monday to spin off nearly all of the company's remaining stake in Delphi Automotive Systems to shareholders next month.
As a result of the board's action, 80.1 percent of the ownership of Delphi, or nearly 453 million shares of common stock now owned by General Motors, will be distributed to current shareholders of the world's largest auto maker.
Pending Internal Revenue Service approval, the company also plans to set aside its remaining 2.2 percent stake in a Voluntary Employee Beneficiary Association trust, which can be used to fund benefits for hourly employees.
General Motors sold 100 million shares of Delphi (DPH), the world's largest auto parts maker, in February in an initial public offering at $17 each. GM had said it wanted to divest itself of the remaining 465 million shares by year's end.
GM will effect the tax free spin-off by declaring a dividend on GM's common stock (GM) consisting of 452.6 million shares of Delphi payable at the opening of business on May 28, GM officials said.
The transaction will not impact General Motors' current 50-cent quarterly dividend or Delphi's position as a critical supplier of GM auto parts, company officials said.
Splitting Delphi into a separate company will break up GM's vertical integration but will free the auto maker to obtain better deals on parts and allow Delphi to expand business with GM's rivals. The United Auto Workers, which represents employees at both companies, has said the separation threatens wages and was urging GM to retain its controlling stake in Delphi.
GM shares closed up 2-1/2 at 88-1/8 on the New York Stock Exchange Friday, while Delphi finished down 1/8 to17-5/16.
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