News Corp. withdraws bid for GM's Hughes
By Reuters
October 28, 2001, 9:15 a.m. PT
news.cnet.com
NEW YORK--Rupert Murdoch's News Corp. said Saturday it was withdrawing its proposal to take over satellite television company Hughes Electronics, after Hughes' parent General Motors failed to choose a buyer at its board meeting earlier in the day.
This leaves Hughes' rival EchoStar Communications, which was believed to be offering as much as $31.5 billion in stock and cash, as the only remaining party negotiating with GM and Hughes.
"We have no option but to withdraw immediately our fully negotiated and financed proposal," Chief Executive Murdoch said in a statement.
"Hughes would have been an excellent strategic fit for our global platforms, and we are disappointed with the board's inaction in the face of an as-yet unfinanced counter proposal."
Littleton, Colo.-based EchoStar is offering 0.75 a share for each Hughes share, and is believed to be lining up as much as $5.5 billion in cash from credit lines supplied by UBS Warburg and Deutsche Bank.
EchoStar is still interested in completing a deal, a source familiar with the matter said.
"GM needs to review some of the financing details before finalizing a deal with EchoStar," a source said.
EchoStar and Hughes executives declined to comment. GM did not immediately return phone calls requesting comment.
Global distribution
For a year and a half, News Corp. had coveted Hughes' DirecTV satellite service as the U.S. component of its Sky Global network of satellite TV service, which stretches from Europe to Asia to Latin America.
Had it succeeded in its proposal, the media conglomerate would have had a global distribution network for its vast array of programming assets, which include the Fox Broadcasting Network, Twentieth Century Fox film studios and cable channels such as Fox News Channel and FX.
News Corp. planned to merge Hughes with Sky Global and spin off the combined entity as an independent publicly traded entity. GM, which owns roughly 30 percent of Hughes, would have received approximately $4 billion in cash from News Corp.'s partners Microsoft and cable magnate John Malone, sources familiar with the matter said.
But skeptics noted a combined Sky Global entity has no transparent value, which makes it difficult for Hughes shareholders to lock in a quantifiable premium for their assets.
Analysts in Australia, where News Corp. retains its primary listing, said the market had effectively eroded any share price premium attached to the deal over the past few weeks as doubts grew over whether Murdoch could pull off the ambitious deal.
The media mogul told shareholders this month he had a "50/50" chance of winning Hughes, and recently accused adversary EchoStar Chief Executive Charlie Ergen of "playing a clever game of poker" with his unsolicited bid.
"They've clearly reduced the chance of a material positive driver, but I don't think it's over and out yet. I think you've got to wait until EchoStar has signed a deal before you can discount News Corp. completely," said a Sydney-based analyst who declined to be identified.
Antitrust concerns
Should EchoStar be successful in its acquisition of Hughes, it would combine the top two U.S. satellite TV companies, bringing together DirecTV's over 10 million subscribers with EchoStar's Dish Network, which has more than 6 million subscribers.
The combination of the top two U.S. satellite TV services is likely to raise eyebrows among U.S. Justice Department antitrust investigators and congressional leaders, as it would limit choices for rural customers who don't have access to cable television, satellite's fierce competitor. Murdoch has already started to fan these flames.
"This means there will be no choice for millions of television consumers in rural America," Murdoch said in Saturday's statement.
EchoStar has argued, however, that safeguards could be built into the deal that protect rural customers and that cable companies provide enough competition to keep a combined EchoStar-Hughes entity from having any undue influence in the market.
"Ergen's playing a very clever game of poker, if he has caused News Corp. to walk away from this deal, then he's the big winner," said the Sydney analyst. |
