NEW YORK (CNNfn) - Shares of both General Motors Corp. and Hughes Electronics Corp. surged Monday on expectations that GM's board of directors could decide to shed all or part of the satellite communications unit.|
GM (GM) shares rose 2-1/8, or 2.8 percent, to 77-7/8 in mid-afternoon trade on the New York Stock Exchange, extending a 5 percent gain recorded Friday. Hughes (GMH) shares, which track the value of the satellite business within GM, jumped 5-3/8, or just over 6 percent, to 95-1/8.
Analysts have speculated for weeks that GM could decide its future intentions for its 74 percent stake in El Segundo, Calif.-based Hughes either after a board meeting today or in early February.
A GM spokeswoman confirmed the board was meeting Monday, but declined to reveal the agenda or its plans for Hughes. She confirmed that GM Vice Chairman Harry Pearce told analysts in October that Hughes would present its annual business plan to the board today.
Analysts were skeptical that a takeover of GM could be mounted, but they did say it could increase pressure on GM to spin off Hughes in order to boost GM's stock.
"We would note that given the size of GM, there are relatively few players that could pull such a deal off," Deutsche Bank Alex. Brown analyst Rod Lache said in a report. "Consequently, betting on a takeover of this scale seems to us to be more like gambling than investing."
Lache speculated that GM may decide to spin off one-third of Hughes, worth about $27 billion. GM would hold on to another one-third, and put the remaining one-third into a trust to retire debt and medical benefits obligations.
GM's stock could rise to about $88 if that scenario played out, Lache said.
Hughes makes communications satellites and provides satellite-based services. It owns and operates one of the world's largest private fleets of geo-stationary communications satellites; it also operates the DirecTV satellite television service..
Separately, weekly financial magazine Barron's reported that speculation has mounted that GM could become a takeover target, though some analysts sounded a note of caution about the feasibility of taking over such a huge company.
The article said possible bidders could be a telecommunications company or a group of investors who may seek to grab control of Hughes. The GM spokeswoman also declined to comment on the takeover speculation.
-- from staff and wire reports