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News > Deals
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GM Hughes decision looms
graphic October 26, 2001: 2:09 p.m. ET

News Corp. pushes for decision on whether it or EchoStar will buy unit.
By Staff Writer Luisa Beltran
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  • GM could decide on Hughes soon - Oct. 24, 2001
  • Echostar makes $30B Hughes bid - Aug. 6, 2001
  • GM approves DirectTV talks - May 1, 2001
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    NEW YORK (CNNmoney) - News Corp. is pushing the board of General Motors to finally end the 18-month bidding war for Hughes Electronics Corp., a source familiar with the situation said Friday.

    The GM board will meet Saturday to decide whether to sell Hughes to News Corp. or EchoStar Communications Corp., the source said. An agreement is expected within 48 hours, a banking source said.

    "News Corp. put a gun to GM's head and told them to decide this weekend," the source said. "They said 'Decide this weekend or we walk.'"

    Detroit-based General Motors reiterated Friday that the company has no regularly-scheduled board meeting planned anytime soon. However, spokesman Jerry Dubrowski declined to comment on whether a special meeting is being called.

    Shares of GM (GM: up $0.77 to $45.40, Research, Estimates) gained more than 2 percent Friday, Hughes and News Corp. dropped nominally, and EchoStar shed more than 4 percent.

    GM's decision will center on whether EchoStar, the number-two U.S. satellite television provider, has its financing definitively worked out and whether it has had time to work out all the issues involved in a Hughes-EchoStar combination, the source said.

    If any issue or problem has not been worked out the advantage probably will go to News Corp., the source said.

    "If EchoStar doesn't have the financing, or if the deal has not been negotiated [thoroughly], then it is incredibly unlikely that GM will go with EchoStar," the source said.

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    Littleton, Colo.-based EchoStar (DISH: down $1.14 to $25.26, Research, Estimates) has secured commitments from bankers UBS Warburg and Deutsche Bank for a $5.5 billion line of credit but the agreements have not been finalized, sources said.

    A Hughes-EchoStar merger would not close for at least a year and it is unclear whether the banks will maintain their commitment that long, especially if a U.S. recession deepens, a source said.

    But the EchoStar bid offers more of a premium. In August, EchoStar made an unsolicited offer, now valued at $27 billion, for El Segundo, Calif.-based Hughes (GMH: down $0.05 to $15.35, Research, Estimates), which owns DirecTV, the No.1 satellite-television broadcaster.

    An EchoStar-Hughes transaction would create a satellite company with 16.7 million subscribers, making a robust competitor to AT&T in its cable business, the biggest in the United States.

    In contrast, News Corp.'s (NWS: down $0.01 to $29.05, Research, Estimates) offer does not offer much of a premium but would be an easy sell to U.S. regulators. News Corp. is the parent of Sky Global Networks, the world's largest satellite television company.

    News Corp.'s bid is worth $22 billion, with a $2.9 billion cash contribution from Microsoft and $1 billion in cash from John Malone's Liberty Media, sources said. If successful, News Corp. would gain control of DirecTV, which has nearly 10 million subscribers in the United States and gain a presence in the sought-after U.S. market. Investors also would also gain access to a growing global satellite empire.

    "We are confident that there are excellent competitive justifications and consumer benefits that would exist for either [a News Corp. or an EchoStar] transaction," GM spokesman Dubrowski said.

    Last May, GM approved further discussions with News Corp. but they were delayed when EchoStar made its bid. Hughes shares have plummeted 54 percent from their 52-week high of $33.50.

    As Hughes shares have dropped, General Motors has been eager to "get rid of it" and sell the unit to a company that could make something of the company, the source said.

    Since making its bid, EchoStar has had little time to work through the various issues involved in a merger or to finalize its bid.

    "News Corp. is betting that EchoStar is not ready yet," the source said.

    GM also is not yet comfortable with all the competitive issues an EchoStar bid would raise, the source said. A GM Hughes-Echostar merger would combine the number-one and number-two cable satellite providers. EchoStar CEO Charlie Ergen has claimed that cable TV also is a viable competitor in the market.

    "Consumers will have no choice in the cable TV market," a different source said.

    Both Hughes and News Corp. declined to comment. graphic

      RELATED STORIES

    GM could decide on Hughes soon - Oct. 24, 2001

    Echostar makes $30B Hughes bid - Aug. 6, 2001

    GM approves DirectTV talks - May 1, 2001





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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