NEW YORK (CNNfn) - EchoStar, the No. 2 U.S. satellite broadcaster, has permission from General Motors to talk to subsidiary Hughes Electronics about a possible takeover.|
A spokeswoman for EchoStar said Thursday the company received a go-ahead from GM (GM: up $0.01 to $56.60, Research, Estimates) for talks that could scuttle ongoing negotiations between DirecTV operator Hughes and Rupert Murdoch's News Corp. (NWS: up $0.57 to $37.10, Research, Estimates).
"GM notified EchoStar this week that GM was willing to establish a dialogue between Echostar's and GM's respective legal and financial advisors so as to better understand a possible transaction," EchoStar said in a Securities and Exchange Commission filing.
Echostar (DISH: up $0.29 to $33.59, Research, Estimates) is set to make a $5 billion proposal to acquire rival Hughes (GMH: up $0.40 to $24.70, Research, Estimates), the Wall Street Journal said Thursday.
"It would be a mistake to discount EchoStar's seriousness to get its hands on DirecTV," S.G. Cowen Securities analysts Robert Kaimowitz said. "I believe they're raising cash to make a run at DirecTV."
Kaimowitz said the combination of DirecTV and EchoStar's DISH Network would be a good fit.
"Their geographic focus tends to be different," he said "DirecTV's core subscriber business tends to be in the more suburban, urban areas ... EchoStar subscribers are more in the non-urban areas"
EchoStar's bid could set the stage for a clash of wills between EchoStar (DISH: Research, Estimates) Chairman Charlie Ergen and Murdoch, who are long-time foes, the paper said.
A GM spokeswoman would not comment specifically on a possible bid from Echostar but said the company still is negotiating with News Corp. and would consider other offers.
"A couple of weeks ago we announced we were proceeding with negotiations with News Corp. That is our priority," Hughes' Toni Simonetti told CNNfn. "We are engaged in these negotiations with News Corp. and Sky Global Network. The company and our board of directors have an obligation to respond to the interests of all of our shareholders. As such, we would always consider any alternative."
News Corp. did not immediately return calls for comment.
The combined company would dominate the satellite-broadcast market in the U.S. with 15 million subscribers, eliminating all competition in certain rural markets, according to the paper
Kaimowitz said GM's willingness to talk to EchoStar does not necessarily mean there is trouble with the News Corp. negotiations.
"I think the GM board realized they had a fiduciary responsibility to look at all real offers," he said.