HUGHES BACKS OUT OF NEWS CORP.-DIRECTV DEAL
Hughes Electronics decided not to sell DirecTV to News Corp. because companies weren’t able to agree on price, CEO Michael Smith said. Smith made first public comments on talks at Morgan Stanley Analysts Conference in N.Y. since rumors begin to surface about possible sale to Rupert Murdoch and News Corp. last month in transaction that would have created $75 billion global satellite empire. It was widely speculated by industry insiders that Murdoch was offering stock while partners Microsoft and Liberty Media would ante up $5 billion and $1 billion in cash, respectively. New company reportedly would have been owned 65% by Hughes shareholders and 35% by News Corp., which would manage new company. “It doesn’t make any sense to us and we won’t do that deal,” Smith said. “It’s as simple as that. There’s not enough value in the deal. End of story.”
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There was no word on how latest decision might affect talks with other potential buyers. Smith said that despite fallout from failed News Corp. talks, other suitors still were interested, although he wasn’t specific. AOL Time Warner and Comcast have been mentioned as possible buyers, but would face antitrust scrutiny. Walt Disney also has been mentioned and DirecTV rival EchoStar could be target, industry sources said. GM and Hughes continued to insist they would find buyer and would explore all of their options, including possible spinoff to shareholders, outright sale or keeping unit. News Corp. isn’t giving up, and spokesman said negotiations with Hughes would continue, although no timetable was given to wrap things up: “I know progress has been slow, but talks are continuing.”
Smith denied reports he was stumbling block to transaction because of personal interests and unconfirmed plan to spin off Hughes from General Motors into independent company that he would control. Industry sources indicate Smith wanted 30% stake in merged companies before he would give deal his blessing. “This is a premise that’s absolutely false and untrue,” he said. Smith said company was looking at ways to restructure its ownership to increase its options: “Whether and when we might be able to announce a transaction remains uncertain, although it’s a very high priority to attain resolution of the matter as promptly as practical.”