DirecTV in the News

News Corp Withdraws Bid for Hughes

DETROIT (AP) - October 27, 2001 - News Corp. withdrew its long-standing offer for the General Motors Corp. subsidiary Hughes Electronics on Saturday, leaving EchoStar as the lone suitor for the company that owns the leading home satellite TV provider DirecTV.

News Corp. said it ended its pursuit of Hughes because the automaker's board of directors failed to make a decision on the deal, which they had negotiated more than 18 months.

"We have no option but to withdraw immediately our fully negotiated and financed proposal," News Corp. chairman and chief executive officer Rupert Murdoch said in a statement. "We are disappointed with the board's inaction in the face of an as-yet unfinanced counter proposal."

That proposal was made by Littleton, Colo.-based EchoStar, which proposed a $28.8 billion stock swap and assumption of almost $2 billion in debt for Hughes. The company also is guaranteeing GM a $500 million breakup consideration if regulators reject the deal.

GM's board had expected to decide Saturday between the suitors, which coveted Hughes's DirecTV unit and its more than 10 million subscribers.

The GM board will meet Sunday to continue its deliberations, according to a source familiar with the negotiations who requested anonymity.

A spokeswoman for GM said the company had no comment regarding News Corp.'s move and would not speculate if EchoStar would win the battle for Hughes by default.

An EchoStar spokeswoman also declined comment on News Corp. but said company chairman Charles Ergen is still interested in acquiring Hughes.

News Corp. operates satellite TV services overseas but none in the United States. The acquisition of DirecTV would have given the company a global satellite television network.

EchoStar operates the Dish Network, with approximately 6.7 million U.S. subscribers. The addition of DirecTV's business would allow the company to dominate the American home satellite television business.

The possibility of such a stronghold has drawn the attention of at least one consumer group urging federal regulators to block an EchoStar buyout of Hughes. The Federal Communications Commission and the Justice Department would have to approve any possible merger.

The National Consumers League sent a letter expressing its concerns Thursday to the Federal Trade Commission and the Justice Department. It said combining the two largest home satellite TV providers would give that company "absolute monopoly power" over people who live in rural areas and have no cable television access.

The organization did not, however, endorse News Corp.'s bid as an acceptable alternative.

GM is taking regulatory risk into consideration in making its final decision, GM spokeswoman Toni Simonetti said.

The automaker wants to divest itself of Hughes to focus on its core vehicle production business.

Hughes lost $227.2 million in the third quarter and $481.6 million through the first nine months of the year. The company announced plans in August to lay off 10 percent of its 7,900 workers.

In May, Hughes chairman Michael Smith abruptly retired and was replaced by GM vice chairman Harry Pearce. Industry analysts regarded the move as a strategy to reinvigorate the negotiations with News Corp.