Once again, Rupert Murdoch is near to getting his hands on a U.S. satellite television service. The big question seems to be how little he can get away with paying General Motors. The News Corp. chairman is one of the last men standing in the sale of GM's Hughes Electronics, parent of DBS service DirecTV.
After dancing with Hughes for a couple of months, the Baby Bell SBC Corp. declined to submit an offer. Although few outsiders expected SBC Chairman Ed Whitacre to reverse his distaste for the video business, SBC's due diligence was indeed serious. "They had 100 financial people and lawyers in here at one point," said a Hughes executive. Murdoch sidekick John Malone had been wrestling with the idea of making a solo bid for DirecTV. Liberty Media finally agreed to back Murdoch's bid with $500 million in cash.
The only other suitor even making any noise is Cablevision Systems, which is stuck with its own DBS orbital and slot but lacks a business plan that investors find convincing. But it only recently dug itself out of a financial crisis and, as a cable operator trying to buy a DBS service, would be a likely target for antitrust regulators. Still, the MSO needs to keep a high profile in DBS to command any kind of a decent price for its own slot and bird, whether it's from DirecTV or rival DBS service EchoStar or—as Cablevision CEO James Dolan contends—from investors needed to back its HDTV DBS plan.
Murdoch wasn't gloating but instead teased GM about not asking too high a price. "We may not make [a bid] yet; it depends what their asks are," he told reporters after an appearance at economic conference in Los Angeles.
Murdoch is expected to bid only for GM's 20% stake in Hughes, but that portion is composed of supervoting stock powerful enough to let him control Hughes' board. That would probably cost less than $3 billion. He is expected to later target another 20% stake is held by GM's pension fund as well as part of the public's stake.
But don't expect too much of a price squeeze on GM. "He's never been known for underpaying," said one industry executive close to Murdoch.