Liberty Media May Seek DirecTV Alone

Satellite TV leader DirecTV is shaping up as a potential battleground for two of the media industry’s greatest powers: News Corp.’s Rupert Murdoch and Liberty Media Corp.’s John Malone.

Allies on a host of ventures to date, the two chairmen may find themselves pitted against each other in pursuit of an asset that would help complete the empires of both.

The two companies, which have been working as partners to buy DirecTV for more than two years, may now make separate bids for El Segundo- based Hughes Electronics Corp., parent of the satellite TV company, according to sources close to the situation. Each sent in independent teams this month to look at Hughes’ financial books.

News Corp. and Liberty would not comment on their bidding strategies Wednesday, after a report in the Wall Street Journal said the companies were no longer working together on a deal. But Liberty spokesman Mike Erickson said the firm had not changed its position: It would look at the satellite TV provider with or without News Corp.

Erickson said a joint venture may still be possible, noting that bids have not been submitted.

But with the seller’s terms continuing to shift, the two media partners may have no other option but to strike out on their own to get what they want -- control of DirecTV, according to sources.

Until recently, Liberty and News Corp. were discussing a 50-50 venture to buy the controlling 30% stake in Hughes owned by General Motors Corp. The stake has a market value of about $4.5 billion.

Sources say GM is now considering selling only two-thirds of its stake because unloading all of it would trigger a tax liability. Sources also say that neither News Corp. nor Liberty is comfortable with the slim margin of control that half of a 20% stake would give each of them. Besides, either could afford to do the smaller deal on its own.

Analysts say the competing interests could escalate the asking price for Hughes. Another potential bidder, SBC Communications Inc., the nation’s second-largest provider of local phone service, also sent in a team this month to review Hughes’ books, according to sources close to the situation.

“This could mean that the auction process takes longer and the winner pays more,” said Blair Levin, an analyst at Legg Mason in Washington who follows the media industry.

Judging from the flat stock prices, however, Wall Street seems unconvinced that a bidding war could erupt. Malone, sources say, is not going to engage in a bidding contest with Murdoch because it ultimately could hurt Liberty. Liberty owns 18% of News Corp., making the company the single largest shareholder after the Murdoch family.

Hughes shares have traded down this year and Wednesday they fell 23 cents to $9.93 on the New York Stock Exchange. Liberty Media fell 13 cents to $8.87 and News Corp. lost 40 cents to $24.70, also on the NYSE.

News Corp.’s interest in Hughes is strategic. Murdoch wants DirecTV to fill a U.S. hole in his global satellite empire.

Sources say Malone sees DirecTV as his way to keep Liberty from being regulated as a mutual fund -- a possibility because so many of its assets are minority stakes in media companies.

In addition, he is eager to regain the distribution and operating clout he lost after selling his cable company, Tele-Communications Inc., to AT&T; Corp. in the late 1990s.

“He wants back in the game badly,” said one source close to Malone.