Several seemingly unlikely suitors for General
Motors Corp. are eyeing the automaker these days, seeking to gain
control of the company's DirecTV satellite business.
Some of the biggest media and telecommunications companies covet
DirecTV, which provides wireless television service and high-speed
wireless Internet services. DirecTV is part of Hughes Electronics
Corp., a subsidiary of General Motors.
Shares of both General Motors and Hughes shot up Thursday after
a report on CNBC that News Corp. and Liberty Media were considering
a takeover bid for General Motors in an effort to get control of
News Corp. quickly issued a statement saying the report was
"entirely false and without merit," but the unabated market
speculation highlights the fact that GM, which declined comment, is
sitting on a very valuable asset.
"Hughes fits nicely with many of the other media and
telecommunications companies, but I am of the opinion that GM would
like to keep control of Hughes and doesn't want to let it go,"
said Mike Kagan, portfolio manager of the Salomon Brothers Fund,
which owns 100,000 shares of Hughes.
When GM bought Hughes in 1985, GM controlled about 41 percent of
the U.S. automotive market. GM executives acquired Hughes to help
offset the cyclical troughs of car sales.
They couldn't have guessed that Hughes' satellite business would
someday be on the leading edge of Internet and television
technology. Today, GM's share of the car market has shrunk to 29
percent, and Hughes' market value (more than $60 billion) is
greater than General Motors', the world's largest automaker (about
Earlier this year, Hughes sold its satellite manufacturing
business to Boeing in order to focus on its fast-growing DirecTV
wireless television service and new Internet ventures.
While analysts would not rule out a bid for General Motors, any
unwanted bid would meet huge opposition. GM has tremendous clout in
Washington as well as on Wall Street, and the company has a strong
"The logistics are quite difficult, and it certainly wouldn't
be done without a fight," said Nicholas Lobaccaro, an analyst with
Some precedent exists; in 1995, Kirk Kerkorian made a hostile
bid for Chrysler Corp. Kerkorian backed down after an ugly 10-month
battle, though he made Chrysler take action to boost its flagging
General Motors, for its part, has tried to unlock the value of
Hughes, which trades as a tracking stock. A tracking stock reflects
the value of a specific corporate line of business.
The auto manufacturer, which holds a controlling stake in
Hughes, recently said it would buyback about $9 billion of GM
shares using Hughes' stock. This would give its shareholders more
of the benefit from Hughes' shares, which have risen 30 percent
this year compared with GM's 12 percent price appreciation.