Liberty’s hot to shop

DirecTV & Universal atop Malone's media wish list

EchoStar and DirecTV parent Hughes Electronics officially broke up Tuesday, and at least one eager bidder jumped at the chance to nab the satcaster.

Liberty Media prexy-CEO Robert Bennett said his company will make a run for DirecTV, either alone or in partnership with Rupert Murdoch’s News Corp.

“I would hope that we’d find a way to work together instead of bidding against each other,” Bennett told investors at the UBS Warburg media conference in Gotham on Tuesday.

Liberty also has been talking with Vivendi Universal chairman Jean-Rene Fourtou, who is in New York this week, about acquiring U’s assets. Liberty, which is owned by John Malone, wants cable channels USA Network and Sci Fi, and needs Universal in order to feed pay TV service Starz Encore.

‘More complicated’

“We don’t really have our arms around the music business. If that’s included, it would get more complicated,” Bennett told reporters after his presentation, referring to Universal Music. He’s convinced Viv U will sell its U.S. showbiz assets but said it’s impossible to put a pricetag on the biz before going through the numbers.

Marvin Davis and several financial partners have offered a rich $20 billion for Universal. “I’d say if they have $20 billionthat can be wired to their bank account, they should take it and sell the assets,” said Bennett, who added that Liberty potentially could do deals with Vivendi Universal and Hughes.

“It’s typical Liberty,” said one investor at the conference. “They’ve got a lot of options and they keep people guessing.”

Bennett’s comments came just hours after EchoStar and DirecTV announced in a joint statement that they are walking away from their doomed merger, with EchoStar paying a $600 million kill fee to Hughes.

Courting peace

Wall Streeters and industry insiders were surprised that wily EchoStar CEO Charlie Ergen handed over the full amount quietly — without a court battle. That may be because Hughes isn’t forcing EchoStar to buy its PanAmSat unit, which was called for in the original merger contract.

Liberty has been investing heavily this year in European cable, but Bennett said U.S. satellite companies are more attractive vs. cable since they’re growing faster, have cleaner balance sheets and lower costs.

DirecTV is a lot cheaper than it was when Murdoch was negotiating for it with Liberty as a partner. Now there seems to have been a subtle shift in tone, with Liberty more vocal about the possibility of a solo bid.

Hughes dumped News Corp. in favor of EchoStar, with Murdoch’s Washington reps subsequently fighting the EchoStar/DirecTV deal.

Hughes indicated for the first time last week that it was ready to cuts its losses and walk away from the EchoStar deal, rejected this fall by federal regulators. Initially, Hughes joined EchoStar’s efforts to appeal the decision, then backed down. (Daily Variety, Dec. 4)

It was a bitter pill to swallow for Ergen, the first media mogul in nearly three decades to have a major merger rejected by the FCC. Both it and the U.S. Dept. of Justice said a combined EchoStar/DirecTV would pose a monopoly in rural areas with no access to cable.

EchoStar said it would take a $700 million charge in the fourth quarter for the breakup fee and other merger-related costs. But its shares jumped nearly 11% on Monday as the controversial union was put to rest at last.

“Obviously, we are disappointed in the final outcome. However, EchoStar will continue to seek alternative, innovative ways to provide competition to the rapidly consolidating cable industry and to provide more choices for all consumers,” Ergen said.

‘Best alternative’

Hughes prexy-CEO Jack Shaw said that despite Washington’s rejection, he believed the failed merger would have been a victory for consumers and shareholders. “However, since the merger couldn’t be completed, we concluded that this settlement is the best alternative for Hughes and places us in the best position to move ahead with our business.”

R. Hewitt Pate, acting head of the DOJ’s antitrust division, applauded the companies’ decision to part ways and scrap the appeal process.

“We welcome this decision to abandon the transaction,” Pate said. “Because the merger is being abandoned, America’s consumers will continue to reap the benefits of competition in the multichannel video programming distribution business.”

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