Triangle Broadcasting (fka GAAY)

[jmhollen]

Hughes Electronics seeks to raise debt for spinoff

LOS ANGELES, March 10 (Reuters) - Hughes Electronics Corp. (NYSE:GMH - news) Chairman Michael Smith is promoting a plan to spin off the satellite service from General Motors Corp. (NYSE:GM - news) as an independent unit, the Los Angeles Times reported Saturday.

Under one possible scenario, Hughes could raise as much as $6 billion in debt to pay off parent GM and take the service, DirecTV, independent, the newspaper said.

Rupert Murdoch's News Corp. (Australia:NCP.AX - news), the world's fifth- largest media conglomerate, has been negotiating for months in a frustrated attempt to close a deal that would merge DirecTV into its own operations to create the world's largest satellite broadcast network.

The parties agreed on the outline of a complicated $70 billion deal last month, but subsequent talks have stalled over the price of the acquisition and the management structure of the new company.

Smith has been urging News Corp. to provide more favorable terms for the deal by agreeing to take only 30 percent of the merged entity as opposed to the 35 percent initially proposed, the Los Angeles Times reported.

At the same time, Smith has been approaching other potential strategic investors, such as Microsoft Corp. (NasdaqNM:MSFT - news) and trying to convince them to take a stake in the satellite broadcaster independent of News Corp., the newspaper said.

Microsoft, which is eager to broaden its access to the market for digital set-top boxes, had reportedly agreed to invest up to $5 billion in a News Corp.-led deal.

Under the initial News Corp. proposal, Smith would have been out of a job and DirecTV Chairman Eddy Hartenstein would have reported to the chief of Sky Global Networks, Chase Carey, the Los Angeles Times said.

Sky Global Networks groups News Corp.'s satellite properties, including holdings in British Sky Broadcasting, SkyPerecTV in Japan and Asia's StarTV, a fully-owned subsidiary.

A spinoff of Hughes as an independent company would not preclude Murdoch from concluding a later merger that would still give his network access to DirecTV's 9.5 million U.S. subscribers, the newspaper said.

Hughes shares have fallen about 18 percent since early February when details of the News Corp. deal began to emerge. The stock closed Friday at $22.90 on the New York Stock Exchange, down 2 percent.

A News Corp. spokesman said Friday that the company was still in talks with both Hughes and GM, although sources near the talks have said that Murdoch is losing patience with the grinding pace of discussions.

If talks break down, News Corp. could mount a bid for DirecTV's smaller rival, EchoStar Communications Corp.

(NasdaqNM:DISH - news), or float his Sky Global satellite holdings without a U.S. component.

Hughes is a tracking stock of GM, meaning that public shareholders benefit from the company's financial results but lack voting rights.