Hughes Left To Tender Mercies Of Murdoch Mark Lewis, 12.10.02, 1:15 PM ET
Hughes Electronics can read its fate in the dip its stock took this morning when its $18 billion deal to be acquired by EchoStar Communications finally died. With EchoStar's Charlie Ergen out of the picture, the only suitor left is Rupert Murdoch--and he will not pay the same premium.
Murdoch has said he will not risk News Corp.'s (nyse: NWS - news - people ) credit ratings by taking on a boatload of debt to fund a Hughes purchase. The market took him at his word: News Corp. shares have been buoyant for most of the fall. The stock hardly budged this morning after Hughes (nyse: GMH - news - people ) and EchoStar (nasdaq: DISH - news - people ) formally abandoned their merger, so clearly no one expects Murdoch to splash out generously for Hughes.
Yet who else will step forward to snatch this prize from him? He almost grasped it a year ago, but Ergen stepped in with a richer bid. Then Ergen was unable to persuade federal regulators to allow him a monopoly over the U.S. satellite-TV market.
Today, Ergen finally walked away from the deal. He agreed to pay Hughes a $600 million breakup fee, but he will not, after all, have to pony up $2.7 billion to make good on his commitment to acquire Hughes's majority stake in PanAmSat (nasdaq: SPOT - news - people ). EchoStar shares soared 12% on the news.
As for PanAmSat, a reasonable guess is that it would eventually be sold off to help pay for the deal by which Murdoch acquires Hughes and its satellite unit, DirecTV.
That topic was not being addressed this morning--at least not in public. Hughes spokesman Richard Dore said the firm had been concentrating on the EchoStar deal rather than on alternatives to it. "There's nothing else working right now," Dore said, but he added that Hughes would consider new opportunities as they present themselves.
Murdoch will present one, without fail. DirecTV would be the capstone for the global content-and-distribution empire that Murdoch has spent several decades putting together. And General Motors (nyse: GM - news - people ), which controls Hughes, needs to sell that stake to raise cash for other purposes.
Dore disputed the suggestion that Hughes is in a weaker bargaining position now that Ergen is out of the picture. "We're a lot stronger than we were a year ago," he said. "We'll wait and see what happens."
But Ergen could afford to bid generously for Hughes because the deal would have given him a monopoly. Nobody else is likely to outbid Murdoch this time around.