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Cablevision, 3 others, to bid for Hughes - sources

By Jeffrey Goldfarb

NEW YORK, March 27 (Reuters) - Cablevision Systems Corp. is expected to throw its hat in the ring for DirecTV as one of four suitors planning to submit a bid by Friday to take over at least part of General Motors Corp.'s satellite TV business, according to people familiar with the situation.

Also expected to bid are Rupert Murdoch's News Corp. , John Malone-led Liberty Media Corp. and local telephone provider SBC Communications Inc. , these people said.

The four companies will outline their offers -- which are likely to include the tax consequences and structural aspects -- for DirecTV's parent Hughes Electronics Corp. and will provide actual dollar figures next week, they added.

Cablevision's bid could be backed by private equity investors, including possibly Quadrangle Group, whose founder, Steven Rattner, recently joined Cablevision's board, sources said. Cablevision has been angling to launch a competing satellite TV service, but acquiring the industry leader would be a quicker entry route.

Cablevision, based in Bethpage, New York, provides cable to about three million subscribers, and also owns the New York Rangers hockey team and the New York Knicks basketball team and stakes in cable networks.

Two years ago, Malone bankrolled Murdoch's effort to buy Hughes. But Murdoch lost to EchoStar Communications Corp. , whose own deal, originally valued at about $30 billion, fell apart after regulators raised concerns about merging the two biggest satellite TV businesses.

The new suitors are not expected to run into that kind of regulatory roadblock.

EchoStar offered about $23 a share, or about an 18 percent premium, for Hughes stock in August 2001. Hughes shares closed on Thursday at $11.40 apiece on the New York Stock Exchange.

"We won't comment on the bidding process, but we continue to evaluate our options and we have nothing to announce at this time," GM spokesman Jerry Dubrowski said.

News Corp., SBC and Quadrangle declined to comment. Cablevision did not return phone calls. Malone told Reuters earlier in the week that he expected to bid. He said he was unlikely to team with Murdoch, but hadn't ruled it out.

"The determining factor for us would be price and regulatory simplicity," said Malone, the chairman of Liberty Media, which owns big stakes in cable networks and media conglomerates, including News Corp.

"I don't think it's an asset we would chase too hard on price because we think there's enough issues inside the other assets," Malone added, referring to DirecTV Latin America, among others. The unit filed for bankruptcy protection last week, citing regional economic and political turmoil.

Hughes also recently shuttered its high-speed phone-line Internet business. And Hughes has billions of dollars of capital spending ahead of it to launch Spaceway, its satellite Internet service for businesses.

Murdoch wants to add the Hughes U.S. satellite business to round out his Europe and Asia satellite operations, while SBC aims to enter the business to compete with cable providers and to accelerate growth for its high-speed Internet service, known as DSL, or digital subscriber line.

COMPLEX OWNERSHIP STRUCTURE

The structural outlines are needed from the bidders because of the complex ownership structure. Hughes currently trades as a General Motors tracking stock, meaning its shares are actually GM shares that track the financial performance of Hughes. Although GM owns 20 percent of the tracking stock, it controls 100 percent of Hughes' underlying assets.

In the EchoStar deal, GM would have spun off Hughes as an independent company that then would have merged with EchoStar. In a seamless transaction immediately after the spinoff, the stock would have been converted into an asset-backed stock that would have then been exchanged for shares in a new company, in which General Motors owned a stake.

For tax purposes, Hughes shareholders would have owned a majority stake in the newly combined company. But the new company was to be named EchoStar and would have been controlled by EchoStar's management.

It's likely that at least one of the bidders will propose a similar transaction this time around, sources said.

"I don't believe either Rupert or SBC can make any economic sense out of trying to swallow the whole thing in a way that gives everyone a premium and takes care of the tax issues," Malone said. (Additional reporting by Tom Johnson and Derek Caney)