News Corp. to Make New Bid for DirecTV

News Corp. is reviving its bid for DirecTV.

Chairman Rupert Murdoch will present an offer to take control of the nation’s leading satellite television provider Monday morning in Detroit to a group of executives from General Motors, parent of DirecTV’s owner, Hughes Electronics Corp., according to executives close to the situation.

Murdoch wants El Segundo-based DirecTV to fill a hole in News Corp.’s worldwide satellite and broadcasting empire.

News Corp. requested the meeting after bad blood developed in negotiations with Hughes Chairman Michael T. Smith, who Murdoch accuses of reneging on a $70-billion merger pact he claims they shook hands on in February.

At the same time, News Corp. is close to finalizing an agreement under which Microsoft Corp. will become its satellite partner. Microsoft has agreed to invest about $3 billion and contribute its interactive television operation, Ultimate TV, to News Corp.’s satellite television company, Sky Global Networks, according to several sources.

Microsoft’s investment is contingent on News Corp.’s pulling off the DirecTV deal. Microsoft Chief Executive Steven Ballmer is scheduled to accompany Murdoch in Detroit, where they will meet with GM CEO and President G. Richard Wagoner Jr. and Vice Chairman Harry J. Pearce.

It is unclear how Murdoch will come up with the $6 billion in cash GM has been demanding as part of its payout. News Corp. has turned to partners such as Microsoft and Liberty Media Corp., which is contributing $500 million, because it lacks its own cash stockpile. But one source said Murdoch could borrow the rest.

Microsoft’s involvement with News Corp., however, kills the chances that the software giant will back a plan being pitched to GM by Smith. After talks with News Corp. broke off, Smith approached several companies, including Microsoft, to put up the cash to buy out GM as part of a spinoff of the satellite concern into an independent company.

Sources close to the companies say that General Electric has looked at Hughes’ books in recent weeks, but has decided not to act. GE, which owns NBC and satellite operations, has been unwilling to make big media investments that would dilute its earnings.

Without a partner, Smith in his meeting with the GM executives Monday afternoon, is expected to propose borrowing the funds to buy out GM and spin off Hughes.

The GM executives will make recommendations to the board at its regularly scheduled meeting May 1.

Neither GM nor News Corp. would comment on the meetings scheduled Monday.

News Corp.’s quest for DirecTV has become a long-running saga. After months of talks and various deal configurations involving multiple parties, discussions between News Corp. and Hughes broke down in February after the terms of a tentative agreement leaked. Hughes shareholders started bailing out of the stock in protest of the minuscule premium they were getting, sending Smith in search of a better deal.

It is unclear whether Murdoch is sweetening the terms of his last proposal. Under that deal, Murdoch agreed to merge his Sky assets into Hughes, with News Corp. ending up with roughly a 35% stake in the company and existing Hughes shareholders holding the remaining 65%. As the single largest shareholder, News Corp. would have control after a spin-out from GM.

If Murdoch does not sweeten it, however, GM could hold off on any restructuring because of the falling value of Hughes, whose biggest asset by far is DirecTV. Its stockmarket value has dropped to about $30 billion, down from $40 billion at the end of January.

For News Corp., DirecTV would fill out its worldwide satellite empire that reaches every corner of the globe but the United States and China.

With 9.8 million subscribers, DirecTV is not only the nation’s dominant satellite TV provider, but trails only two cable companies--AT&T; and AOL Time Warner--in reach.

DirecTV would double Sky’s reach to some 200 million households across the globe.

Microsoft has been angling for as big a presence in the living room for its operating software as it now has in the office. Sources say the Sky deal, while not providing any guarantees, gives Microsoft “preferred supplier” status.

The deal also would allow Microsoft to exit gracefully from the interactive television business after spinning its wheels for a decade without much success. The company has spent an estimated $1.5 billion since 1997, when it bought WebTV for $500 million. About 1 million people use WebTV to surf the Web using their TV set.

In March, Microsoft unveiled a new souped-up version called Ultimate TV, which gives customers Web surfing, VCR functionality and DirecTV access in the same $449 box. But few analysts expect interactive television to be much of a business for years.

Some on Wall Street are expecting Murdoch to jump-start the interactive television business if he gains control of DirecTV by giving away boxes as he has in Britain. News Corp.’s BSkyB satellite operation in Britain is the world leader in interactive television, allowing users to change camera angles on sports games, get replays, personalize the evening news and bet on sporting events.