Business Valuation
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CRUISEUNITVALUATION-URLs_V3.docxSource: GM
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GM Is Exploring Listing Shares of Cruise Self-Driving Unit
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June 15, 2018, 2:27 PM EDT Updated on June 15, 2018, 3:32 PM EDT
· Carmaker privately discussing options including IPO, spinoff
· SoftBank fund’s $2.25 billion investment starts 7-year clock
General Motors Co. is having early discussions internally and with banks about strategic options for its self-driving car unit Cruise Automation, according to people familiar with the matter.
The largest U.S. automaker is researching possibilities including a public offering of shares, listing a separate tracking stock to reflect its value, or spinning off the unit, said the people, who asked not to be identified because the discussions are private. GM won’t make a decision until Cruise is further along in development and may not take any action for a couple of years, if at all.
Source: GM
While a public offering may be well into its future, the exploration shows how far Cruise has come since it was acquired two years ago as a 50-person firm. It’s now attracting capital, hiring by the hundreds and aiming to offer an app-based, ride-hailing service next year. The company, whose autonomous vehicle prototypes are still in the testing phase, wants to demonstrate commercial viability and build out a business before moving forward with any plans, said two of the people. GM declined to comment.
GM shares rose on the news, gaining as much as 3.3 percent. Ford Motor Co. and Fiat Chrysler Automobiles NV also jumped briefly.
The exploration also underscores that GM sees Cruise, which develops self-driving cars in San Francisco, as a vital piece of the company’s future that could be fostered by raising its profile with investors. Chief Executive Officer Mary Barra sees it as a huge strategic asset and a source of future profits. Last month, SoftBank Vision Fund announced plans to invest $2.25 billion in Cruise at an $11.5 billion valuation.
The SoftBank fund is putting an initial $900 million into Cruise this year, followed by $1.35 billion once its autonomous vehicles are ready for business use. The fund will own 19.6 percent of Cruise once the entire investment is completed. If the unit doesn’t have an IPO, spinoff, sale or dissolution within seven years of closing the SoftBank investment, the fund may convert its stake into GM common stock, according to a regulatory filing .
“SoftBank’s investment is a huge mile marker for them in this process,” John Murphy, auto analyst for Bank of America Merrill Lynch, said Thursday in a speech in Detroit. “GM is way out in the lead” on autonomous vehicles.
GM acquired Cruise in 2016 for $581 million in cash. The value of the deal was closer to $1 billion when including incentives for key talent including Cruise CEO Kyle Vogt. The purchase was a coup for company, which is racing Alphabet Inc.’s Waymo and others to develop self-driving car technology that has the potential to transform transportation. Cruise has been testing autonomous Chevrolet Bolt prototypes in San Francisco, Phoenix and outside Detroit.
Of the options GM is considering, it’s unlikely to spin off Cruise because this would risk ceding control and leaving the more than century-old automaker with less of a tech story to tell. An offering of less than 20 percent of Cruise’s equity would enable the automaker to maintain control while potentially making it easier for the unit to hire talent or make acquisitions.
The SoftBank deal ensured that Cruise will have the funding it needs for the next several years. GM’s future moves with the unit will depend on how quickly the public embraces the technology and its use for the ride-hailing business.
GM has experience with a tracking stock, which is intended to trade based on the unit’s performance. The automaker’s Hughes Electronics business was listed this way in the 1990s before GM sold it to Raytheon Co. in 1997.
— With assistance by Keith Naughton
(Updates with trading in the fourth paragraph, analyst’s comment in the seventh paragraph.)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2018
From < https://www.sec.gov/Archives/edgar/data/1467858/000146785819000033/gm201810k.htm >
Note 10. Goodwill and Intangible Assets
Goodwill of $1.9 billion consisted of $1.4 billion recorded in GM Financial and $504 million and $490 million included in GM Cruise at December 31, 2018 and 2017.
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December 31, 2018 |
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|
|
|
|
December 31, 2017 |
|
|
|
|
|
|
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
|
Technology and intellectual property |
$ |
734 |
$ |
457 |
$ |
277 |
$ |
8,092 |
$ |
7,735 |
$ |
357 |
|
Brands |
4,299 |
|
1,165 |
|
3,134 |
|
4,302 |
|
1,044 |
|
3,258 |
|
|
Dealer network, customer relationships and other |
968 |
|
661 |
|
307 |
|
1,310 |
|
933 |
|
377 |
|
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Total intangible assets |
$ |
6,001 |
$ |
2,283 |
$ |
3,718 |
$ |
13,704 |
$ |
9,712 |
$ |
3,992 |
Our amortization expense related to intangible assets was $247 million, $278 million, and $325 million in the years ended December 31, 2018, 2017 and 2016.
Amortization expense related to intangible assets is estimated to be approximately $184 million in each of the next five years.
We removed $7.7 billion of fully amortized intangible assets in the year ended December 31, 2018 which are no longer in use and provide no remaining economic benefit.
67
From < https://www.sec.gov/Archives/edgar/data/1467858/000146785819000033/gm201810k.htm >
Page 53
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Goodwill Goodwill is not amortized but rather tested for impairment annually on October 1 or when events occur or circumstances change that would trigger such a review. The impairment test entails an assessment of qualitative factors to determine whether it is more likely than not that an impairment exists. If it is more likely than not that an impairment exists, then a quantitative impairment test is performed. Impairment exists when the carrying amount of a reporting unit exceeds its fair value.
From < https://www.sec.gov/Archives/edgar/data/1467858/000146785819000033/gm201810k.htm >
2018 10-K (also pdf in files )
https://www.sec.gov/Archives/edgar/data/1467858/000146785819000033/gm201810k.htm
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