GM Gives EchoStar the Nod to Bid for DirecTV

25 May 2001

The stakes were upped yesterday in what promises to be the most bruising battle yet fought in Rupert Murdoch’s bare-knuckle career.

The board of General Motors – ultimate owner of US satellite broadcaster DirecTV – acknowledged that it has an obligation to consider any serious competing proposals to those already lodged by Murdoch’s NewsCorp [WAMN: 24-May-01]. However, stressed GM, it remained “focused on negotiations” with the latter.

Insiders believe that GM opened the door a chink to EchoStar – which it has consistently rebuffed – simply to strengthen its negotiating position. That view carries credence, especially as Washington is thought unlikely to approve a merger between DirecTV and EchoStar – the nation’s two largest satellite broadcasters,.

Those close to Echostar say it is working on a two-stage proposal: (1) To pay GM mucho cash for a minority stake in Hughes Electronics, the GM-controlled parent of DirecTV; and (2) Seek regulatory approval for a full merger.

GM could warm to such a proposal, believe the insiders, as it is eager to cash-in on its investment in Hughes on which it has hung a $5 billion price tag. However, it was unclear yesterday whether EchoStar will be able to lay its hands on that kind of money.

News source: Financial Times