NEW YORK (CNNfn) - America Online Inc. is set to meet with DirecTV owner Hughes Electronics Corp. about a possible sale of the satellite television system, a published report said Wednesday.|
According to the Los Angeles Times, the news could mean AOL is looking at DirecTV as a backup should the Federal Trade Commission block the proposed takeover of Time Warner (TWX: Research, Estimates).
A spokesman for Hughes said the company is looking at a variety of options for DirecTV, but declined to comment on specifics. An AOL spokesman also declined to comment.
Neither AOL Chairman Steve Case nor AOL Chief Operating Officer Robert Pittman is expected to attend the meeting, the newspaper said.
Analysts said it is unlikely AOL will emerge as a buyer for DirecTV, considering the regulatory implications of owning CNNfn-parent Time Warner's cable operations, No. 2 in the country, and the top satellite television company.
"I think that any discussion between AOL and Hughes is about implementation of their marketing agreement," said Tom Eagan, analyst with UBS Warburg.
In June 1999, AOL invested $1.5 billion in DirecTV, hoping the investment would increase subscribers and broaden the audience for its interactive television service AOL TV.
"Almost nothing has been done, they need to get together," Eagan said.
Ty Carmichael, analyst with Prudential Securities, said AOL is probably just getting a look at the "state of the union" of DirecTV's finances.
The L.A. Times said executives close to the situation downplayed the significance of the possible meeting, pointing out that companies routinely look at a competitor's finances when there is a sales opportunity.
After a meeting last month between the companies, AOL signed a confidentiality agreement preventing AOL from disclosing any of Hughes' detailed financial information.
Hughes, which is owned by General Motors (GM: Research, Estimates), has also signed confidentiality agreements with News Corp. (NWS: Research, Estimates), Viacom Inc. (VIA: Research, Estimates) and Comcast Corp. (CMCSA: Research, Estimates).
"I'd bank News Corp. as the most likely buyer, but Sony also has a big interest," Carmichael said.
He said it is possible for a deal to be struck in the first quarter of next year, which would please both GM and Hughes (GMH: Research, Estimates) management.
"This remains a priority for all involved," he said.
Eagan, who agreed News Corp. is still the top suitor, said any deal may have to wait until shares of News Corp., GM and Hughes return to their levels when the two companies began talking in May.
News Corp. was at about $61 at that time, with GM around $87, and Hughes was at about $30, adjusting for a stock split.
In afternoon trading Wednesday, News Corp. lost 38 cents to $34.63, GM rose $1.50 to $53.25 and Hughes rose 55 cents to $24.36.
Shares of AOL lost 17 cents to $48.48.