Liberty, News Corp. Up to Something on DirecTV?

[Gregg Lengling]

Last week's money moves by News Corp. and Liberty Media have everyone speculating about their desire to acquire DirecTV and its parent Hughes Electronics.

No formal deals were unveiled by the media companies concerning their deigns on the satellite TV service. But the money moves announced amount close to $3 billion, and could provide each company with the money needed to acquire DirecTV.

Earlier in the week, News Corp. announced a $1.5 billion, 20-year bond issue. The bonds are convertible into shares of British Sky Broadcasting, the U.K. satellite TV platform controlled by News Corp. Once the deal was announced, speculation surfaced that the issuance could provide capital for acquiring General Motors' stake in Hughes Electronics.

And late in the week, Liberty said it's planning to offer $1.75 billion in 20-year senior debentures convertible into AOL Time Warner shares. The sale could close as soon as Wednesday.

Analysts at Lehman Brothers said that Liberty is projected to have $4.1 billion of liquidity, which could be used to acquire Hughes Electronics or certain assets controlled by Vivendi Entertainment. "We think that $4.1 billion would be more than sufficient to acquire GM's 20 percent Hughes stake, which is currently worth approximately $2.9 billion," Lehman Brothers satellite analyst William Kidd said.

"We continue to believe that News Corp. and Liberty are the front-runners to purchase Hughes," Kidd said in a note released Friday. "Moreover, in contrast to other bidders, we believe these two are likely to be just interested in the 20 percent block, as opposed to a much broader merger structure."