Murdoch mum on Hughes-Sky Global deal

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Rupert Murdoch demurred on reports that his News Corp. is close to wrapping up a deal to buy Hughes Electronics and its DirecTV unit.

``It's common knowledge that we have been in talks with Hughes and GM for some time now," Murdoch said during a conference call to discuss News Corp. and its Fox Entertainment unit's financial results. "Those talks are progressing and I can't really say more than that.''

News Corp. is angling to acquire Hughes by merging it into his Sky Global international DBS operation and give parent General Motors and other Hughes shareholders a major portion of the combined companies' shares. Fox Entertainment Chairman Peter Chernin wouldn't go into detail, but said reports of a $60 billion-$70 billion deal included both pieces of the deal, and that those figures are "at the low end" of the range of values being discussed.

That's not necessarily great news for Hughes shaerholders. News Corp. has in recent months valued Sky Global's assets at around $33 billion. Hughes last year was already trading at a value of $40 billion and was looking for a premium above that. Looks like GMH shareholders might be getting a valuation more than the current $25 per share price, but not even the $45 price their stock traded for last March. Microsoft and Liberty have committed to put up about $6 billion cash into the deal.

Murdoch also minimized the slowdown in ad spending that is battering media stocks. "Whle the ad market has weakened it's not the disaster that's been reported, at least not for us," he said. ``We are far from panicked about the strength of the ad market.'' That's in part because the ratings of Fox Network are picking up, offsetting price dips. He acknowledged that second quarter pacings for Fox o&o stations are down 8-9%, "but not the collapse we read about."
On the cable front, Murdoch sees no quick resolution of the future of Fox Family Worldwide.

News Corp. partner and FFW Chairman Haim Saban has exercised an option to "put" his 49.5% stake to News Corp. and investment bankers on both side are still valuing the company.

Saban contends the whole company is worth $6 billion, making his equity worth $2 billion - in cash. News Corp. sees the troubled Fox Family Channel and other assets as worth much less, doesn't want to pay cash and in any case is loath to take all $2 billion of FFW's debt onto his balance sheet.

Murdoch said that a deal is "several, if not many, months away" and reiterated the company's assurance to lenders and bondholders that, "We're not going to do anything that in any way impairs our credit ratings."
- John Higgins

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