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GM May Take Its Time Before Selling DirecTV

Company is expected to reconsider deal with News Corp. because of unit's low stock price.

January 16, 2003|Sallie Hofmeister | Times Staff Writer

A deal to sell satellite leader DirecTV to News Corp. may not happen so fast after all.

A quick sale was expected in some quarters after EchoStar Communications Corp. paid $600 million to terminate a merger with DirecTV last month, in the face of federal antitrust opposition.

But General Motors Corp., which owns DirecTV through its control of Hughes Electronics Corp., plans to take its time and review options besides a sale to News Corp., which lost a bidding war to EchoStar more than a year ago. Sources say those alternatives include bringing in a new investor to avoid a sale at a time when Hughes' stock is at a low.

Several have already expressed interest, including the Blackstone Group, sources said.

"There are other options that we have, including other strategic investors," said Jack Shaw, chief executive of El Segundo-based Hughes, during a quarterly earnings conference call Wednesday. "We're taking a breath and making sure."

Neither News Corp. nor the Blackstone Group could be reached for comment. But Hughes executives are bracing for a drawn-out process.

"This is going to take months," said one company executive. "And a sale will take a year."

Hughes' top executives will brief GM directors on various options, as well as their tax and regulatory implications, at a board meeting scheduled for later this month, according to company sources. But GM probably won't decide on any course until a February meeting.

The slow pace already is frustrating News Corp., which wants DirecTV to fill a U.S. hole in its global satellite operation, sources said. GM had a preliminary meeting with News Corp. in December.

In other developments, Hughes posted a fourth-quarter profit Wednesday because of the $600-million breakup fee from EchoStar.

But Hughes projected disappointing growth for 2003, sending its shares down 20 cents to $11.90 in the New York Stock Exchange trading.

Hughes posted fourth-quarter net income of $115.3 million, contrasted with a loss of $132.6 million in the same period a year earlier. Hughes does not report per-share results because it is a GM tracking stock.

The EchoStar payment offset a $557-million charge against earnings due to a decline in the goodwill value of DirecTV Latin America, a money-losing service that could seek bankruptcy protection by the end of the month.

Excluding the EchoStar payment and other one-time items, Hughes reported a fourth-quarter loss of $105.4 million, compared with a loss of $178.6 million a year earlier.

Quarterly revenue rose 8.3%, to $2.47 billion. Hughes said it expected revenue for all of 2003 to grow 4% to 6% to as much as $9.5 billion -- below Wall Street estimates.

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