NEW YORK (CNNfn) - EchoStar Communications Corp., the No. 2 U.S. satellite broadcaster, has abandoned its plan to acquire Hughes Electronics Corp., according to press reports Monday.|
Both Hughes and its controlling shareholder, General Motors Corp., rejected an offer from Echostar Chairman Charlie Ergen mainly because of antitrust reasons, the Wall Street Journal reported.
GM and Hughes executives firmly rebuffed an offer from Ergen last week because federal antitrust regulators likely would shoot down an EchoStar takeover of Hughes, the WSJ said.
Both Hughes and Echostar declined to comment while GM could not be reached for comment.
Hughes also reported a steep drop in second-quarter earnings Monday and issued lowered guidance for the third quarter. Hughes (GMH: down $1.50 to $18.95, Research, Estimates) shares dropped nearly 8 percent in early afternoon trading while EchoStar (DISH: up $0.64 to $30.02, Research, Estimates) was relatively unaffected. Both GM (GM: up $0.91 to $67.10, Research, Estimates) †and News Corp. shares gained nearly 2 percent.
EchoStar's apparent dismissal clears the way for Rupert Murdoch's News Corp. to acquire El Segundo, Calif.-based Hughes, which owns DirecTV, the No.1 satellite-television broadcaster, with 10 million subscribers. News Corp. (NWS: up $0.70 to $37.02, Research, Estimates) owns Sky Global Networks, the world's largest satellite television company.
Murdoch hopes to combine DirecTV and Sky Global Networks, creating a $50 billion satellite company.
In early May, GM confirmed that it had approved further talks with News Corp. that would combine the satellite subsidiaries. Terms of the deal call for Hughes shareholders to own more than 50 percent of the combined company, a source close to the situation said.
Negotiations between News Corp. and GM-Hughes are continuing and are "amicable," a News Corp. spokesman said.
Unlike the Echostar offer, Murdoch's bid to acquire DirecTV is not expected to raise regulatory problems. News Corp. also owns Fox Broadcasting Co. and is attempting to create the world's largest satellite system. There are no Federal Communications Commission restrictions in the U.S. barring a media conglomerate that owns a network from also buy a satellite system, a source said.
A deal between GM and News Corp. is expected to be announced "soon," the source said.