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SBC to buy DirecTV? GMH opens the books
Posted 07 February 2003 - 08:52 PM
Filed at 7:01 p.m. ET
NEW YORK (Reuters) - Satellite television operator Hughes Electronics Corp. (GMH.N) is expected next week to open its financial records to suitors interested in its DirecTV arm or the entire company, sources familiar with the situation said on Friday.
Local telephone company SBC Communications Inc. (SBC.N), Rupert Murdoch's News Corp. (NCP.AX), and other bidders are expected to be among the companies that will sign confidentiality agreements to review the financial records, sources said. Reviewing proprietary financial records, a process known as due diligence, is typically the start of a formal auction process.
General Motors Corp. (GM.N), which owns 80 percent of Hughes, has been trying to drum up interest in all or part of its Hughes unit since December, when EchoStar Communications Corp.'s (DISH.O) proposed $18 billion acquisition of Hughes collapsed in the face of stiff opposition from regulators.
General Motors declined to comment on the due diligence process, but reiterated that it is exploring all options for Hughes.
``We have been in a process to review strategic options with respect to Hughes,'' said Toni Simonetti, a GM spokeswoman. ``We believe we have multiple options and we are looking at those but we are not going to comment on anything specific.''
SBC and News Corp. declined to comment.
A spokesman from Hughes said, ``There are a number of options available. General Motors and Hughes have said they will be exploring any opportunities.''
Hughes shares closed Friday down 15 cents at $9.75 on the New York Stock Exchange. The company's stock rose to $10.90 in after-hours trading on Island. SBC shares closed at $25.18, up 27 cents, on the NYSE Friday, but fell to $24.95 in after-hours trading on Instinet.
SBC HOLDS PRELIMINARY TALKS
SBC has been in active talks with DirecTV in recent weeks, but one source described the conversations as preliminary.
The New York Times's online edition reported Friday that Hughes was in serious talks with SBC about selling its DirecTV business for up to $10 billion and was scheduled to begin due diligence next week.
SBC and other Baby Bells already have partnerships with DirecTV to offer television programming to their customers as part of a package of telephone and data services.
Local telephone companies have begun to look for new products and partnerships to prevent revenues from shrinking further in the face of increased competition from rivals and cable television companies, and weak customer demand. SBC expects its 2003 revenues to fall by low single-digit percentage rates.
``The Bell companies should be talking to them because it makes sense for them to think of a video offering in their territory at some point,'' said one banker familiar with the satellite business. ``The problem is they're terrible at doing highly structured deals like this and it isn't a business that they know.''
Should SBC or another Baby Bell be successful in acquiring DirecTV, it would escalate the rivalry between telephone and cable companies. Telephone companies have been searching for the right video and television strategy to compete head-on with cable operators, which have made forays into telephone services.
Cable companies like AT&T Broadband, which was recently bought by Comcast Corp. (CMCSA.O), and Cox Communications Inc. (COX.N) offer local telephone service and compete directly with the likes of SBC for residential customers.
But telephone companies, historically, have been unsuccessful in the media and telephone industry. AT&T Corp. (T.N) last year sold its cable TV arm to Comcast when it abandoned its strategy to create a one-stop shop for communications and entertainment services and
BellSouth Corp. (BLS.N), meanwhile, scrapped plans in 2000 to offer satellite TV service and discontinued a wireless video service in favor of selling satellite TV service from EchoStar to its customers.
Buying a satellite TV company may not make sense at a time when telephone companies are trying to pare debt and cut expenses, one industry executive said. As of Dec. 31, SBC had about $3.57 billion of cash and equivalents and $22 billion of debt. Its stock price has fallen about 30 percent over the past year.
MURDOCH STILL IN THE PURSUIT
Murdoch, meanwhile, has made no secret of his interest in acquiring DirecTV to provide News Corp. with a U.S. component to its global satellite network, which stretches from Latin America to Europe to Australia.
He had been close to completing a deal to buying Hughes, but was then trumped by a bid by Hughes' archrival EchoStar at the 11th hour.
The EchoStar pact ultimately collapsed under the weight of opposition by regulatory authorities who feared that the combination of the top two satellite companies would stymie competition.
Since then, Murdoch had said he would be interested in looking at the assets again, but under different terms than he had first proposed. Originally he planned to combine DirecTV with his satellite assets and take the combined entity public. He had enlisted Liberty Media chairman John Malone and Microsoft to put up billions to close the deal.
Liberty Media has also expressed its interest in Hughes, either with or without News Corp. Murdoch has held a ``meet-and-greet'' with GM Chief Financial Officer John Devine, but no formal discussions have begun, sources said.
Echostar made overtures toward News Corp. about selling its satellite service, but no serious discussions have occured, sources said.
Posted 07 February 2003 - 08:55 PM
Posted 07 February 2003 - 09:10 PM
Originally posted by platinum
My bets on Rupert
Yeah, I saw this thread in the general section
So, can the mods merge or delete this one then?