Hughes Aircraft Sold to GM for $5 Billion in Cash, Stock : Company to Remain Independent

General Motors Corp. announced today that it is buying aerospace giant Hughes Aircraft Co. for more than $5 billion in cash and stocks in the largest merger outside of oil companies in U.S. history.

GM will pay the Howard Hughes Medical Institute, owner of Hughes Aircraft, $2.7 billion in cash for all of the capital stock of Hughes Aircraft and issue to the institute 50 million shares of a new GM class H common stock.

Hughes Aircraft, which has 73,800 employees, is based in El Segundo, Calif., and is the largest employer in the state.

It is the nation’s foremost producer of defense electronic and computer systems and is one of the world’s biggest satellite builders. Its 1984 profit is estimated at more than $200 million on sales of $4.9 billion.

To Remain Independent

Hughes will be maintained as an independent company and will be combined with GM’s Delco automotive electronics business and a portion of its defense operations.

Even with the purchase of the defense contractor, GM--already the nation’s biggest auto maker--will be ranked the second-largest U.S. industrial corporation behind Exxon Corp. in terms of revenues.

GM Chairman Roger B. Smith said at a news conference that the merger between the two firms marks a “truly super historic day.

Smith, who has been quoted in the past as saying GM had a “lulu” in mind in terms of acquisitions, said: “Lulu has come home.”

He said the purchase of Hughes, along with GM’s earlier acquisition of Electronic Data Systems Corp., would strengthen its position in the use of electronics.

Electronics the Key

“Electronics is going to be the key to the 21st Century,” particularly in the manufacturing of cars and in the cars themselves, Smith said.

Robert F. Greenhill, managing director of Morgan Stanley, which represented Hughes Medical in the sale, repeatedly declined to answer questions about other bidders for Hughes that included Ford Motor Co. and Boeing.

The acquisition is the largest outside of the oil industry and eclipsed the recent $5-billion marriage between Allied Corp. and Signal Cos., which decided to merge after considering a joint bid for Hughes Aircraft.

The money will go to the Howard Hughes Medical Institute as owner of Hughes Aircraft, the nation’s seventh largest defense contractor. The institute, as tight-lipped as the eccentric billionaire himself, will use the funds for medical research.

‘One of the Greatest’

Dr. Donald S. Fredrickson, a trustee and chief executive of the institute, said the organization is “grateful that Hughes Aircraft is becoming part of one of America’s greatest corporations.”

Fredrickson said he regretted that Howard Hughes could not see the broadened future for the legacy he had left.

Smith said Hughes will give GM, which has undertaken a program to diversify into the defense and high-technology fields, “a solid base” to move into the next century.

Smith has masterminded GM’s diversification program, which he denied represented a move away from the volatility of the auto industry.

Allen E. Puckett, chairman and chief executive of Hughes Aircraft, and Smith both emphasized that Hughes will continue to operate as a separate but wholly owned subsidiary of the auto maker.

Smith said it has not yet been decided if Puckett, who will stay on as head of Hughes, will serve on the GM board of directors.