In the driver’s seat

Murdoch denies claims he's eyeing GM

Rupert Murdoch, satellites and a giant automaker were front and center Thursday in speculation, denied by News Corp., that the company has talked about buying General Motors in order to gets its hands on GM’s satellite biz.

Naturally, News Corp. shares dipped, easing 2.8% to $61.44. GM rose 6.4% to $87, pulling the Dow up with it, and its Hughes Electronics tracking stock, which houses the appealing satellite assets in question, surged 12.5% to close at $140.

In a statement, News Corp. categorically denounced as “entirely false and without merit” reports that it had engaged in talks with GM, investment bankers or third parties regarding a potential acquisition of GM.

However, insiders acknowledged that such a move might have been bandied about internally since News Corp. is constantly evaluating all its options. Speculation has linked the company with Hughes’ DirecTV satellite unit ever since News Corp. announced plans to collect all of its own worldwide satellite operations into a separate company and spin it off.

But most Wall Streeters have doubted that GM would sell, which is why News Corp. may have mulled making a takeover play for all of GM and then shedding the automotive assets. GM has said publicly that it has no desire to divest Hughes since synergies are constantly emerging between the auto and satellite businesses.

Major purchase

For News Corp. GM would be a major purchase. The Detroit behemoth — which just bought a stake in Italy’s Fiat — has a whopping $176 billion in revenue and a market capitalization of $51 billion. Hughes’ revenue is $5.5 billion, with a market cap of $17.2 billion. That means the division contributes only a fraction of GM’s revenue but an impressive one-third of its market cap — indicating that investors are putting quite a premium on the business.

In response to Wall Street pressure to get a bigger piece of Hughes, GM’s board recently came up with a plan that allowed investors to exchange $9 billion worth of their GM shares for shares of Hughes.

Thursday’s speculation had News Corp. possibly teaming up with cash-rich Liberty Media, its largest outside shareholders, to make a go for GM — Liberty and its Chairman John Malone being the ‘third party’ mentioned in the News Corp. statement.

Spotty record

Murdoch has a spotty record when it comes to the U.S. satcasting market. In 1998, the Justice Dept. refused to allow Murdoch to team up with the cable industry to enter the DBS marketplace since antitrust officials feared cablers would use the DBS spectrum Murdoch controlled at the time to blunt potential competition from other satellite companies.

Since the Justice Dept. succeeded in blocking Murdoch’s deal with Malone (who then owned Tele-Communications, which was subsequently purchased by AT&T) and other cablers, DBS has blossomed, offering many consumers, for the first time, a viable alternative to cable. Congress is so pleased with the competition from DBS that it recently gave the industry permission to offer local cable channels.

So if Murdoch is looking to any cable-related partners to help finance a take over of GM-Hughes, it could attract the attention of antitrust officials who may want to block the deal for the same reasons they did two years ago.

(Christopher Stern in Washington D.C. contributed to this report)

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