News, GM advance talks on DirecTV

Rupert Murdoch wants to merge GM's DirecTV with his Sky Global Network

In this story: Turning point Menu of assets RELATED STORIES, SITES

By Staff and wire reports

NEW YORK -- GM approved further talks to combine its Hughes Electronics, whose primary asset is DirecTV, with News Corp.

News Corp is controlled by media magnate Rupert Murdoch.

The nod makes News Corp the front-runner to combine DirecTV, which has nearly 10 million subscribers in the U.S., with Murdoch's Sky Global Networks, which has holdings in Asia, Australia, Europe and Latin America.

DirecTV represents a long-coveted foothold in the U.S. satellite market for News Corp. Murdoch's aim is to merge DirecTV with Sky Global and spin the combined entity off into a separate company.

Turning point

"The focus of our efforts is to try to get a transaction with News Corp," GM spokeswoman Toni Simonetti said.

"We continue to look at other alternatives, but it's safe to say that talks with News Corp are the focus of our attentions."

Discussions between News Corp and Hughes had faltered in the last several weeks over issues of price and control over the combined company.

"We're delighted with this development," said News Corp spokesman Andrew Butcher.

"We hope to quickly move forward and consummate a definitive agreement to form the world's premier satellite broadcast company."

Last week, Murdoch made a formal proposal to GM executives, which one source familiar with the deal marked as the turning point of the saga.

In the proposal, News Corp agreed to lower its ownership stake in the combined company to roughly 30 percent from the originally proposed 35 percent, the source said. But the source said that News Corp would control the day-to-day operations of the combined unit.

Menu of assets

The exact menu of assets to be included was also changed, he said. The combined company will not include Murdoch's stake in Italian satellite system Stream.

Software giant Microsoft will contribute $3 billion in cash to the transaction, he said, and would get a minority stake and potential customers for its digital set-top box software. Microsoft declined to comment.

Cable magnate John Malone is believed to be contributing $500 million, the source said, although he warned that those numbers were still being discussed. Malone, who is chairman of Liberty Media Group, was not immediately available for comment.

GM said in its statement that there is no assurance than an agreement will be reached.

Reuters contributed to this report.

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