Hughes' DirecTV deal in doubt

Industry and Wall Street executives are becoming skeptical that General Motors will actually sell its Hughes Electronics and DirecTV operation, believing that terms being offered by News Corp. aren't rich enough.

Hughes' stock has been dropping ever since word broke two weeks ago that News Corp. honcho Rupert Murdoch was talking about a deal that would only value Hughes around $35 billion. "They leaked the deal to the street, the street said we don't like it," said one investment banker. "I think GM screwed up, had this auction, thought there would be five bidders and there's only one."

That, Wall Street bankers and analysts said, is why Murdoch acknowledged Tuesday that talks continued but at a "slow and grinding pace." Murdoch wants to pull a reverse merger, push his Sky Global unit, which includes U.K.'s BskyB and Asia's Star DBS services, into Hughes, give Hughes shareholders most of the stock plus some cash, but wind up running the combined operation.

But the valuations aren't right. GM owns 30% of Hughes, which is a tracking stock subsidiary of the car manufacturer. When GM started talking about selling Hughes last year, the unit's stock was in the mid-$30s and it looked like the company could get a valuation of nearly $50 per share from Murdoch. Now the stock is at $22 and might sell for $35. So instead of the $45 billion or so valuation, GM officials are looking at a $30 billion valuation.

Money managers said that GM and Hughes executives have quietly floated a trial baloon in recent days, asking what the market's reaction might be if DirecTV is not sold. A Hughes spokesman said the company is in discussions "with several interested parties" but wouldn't elaborate. - John Higgins