Malone Could Join Murdoch's Hughes Bid

John Malone, it appears, will be chipping in $500 million to back Rupert Murdoch's bid for Hughes Electronics (GMH Quote - Cramer on GMH - Stock Picks).

The Malone-controlled Liberty Media (L Quote - Cramer on L - Stock Picks) and the Murdoch-led News Corp. (NWS Quote - Cramer on NWS - Stock Picks) announced late a deal late Thursday under which Liberty could end up buying $500 million in News Corp. stock.

Specifically, the transaction gives News Corp. the right to compel Liberty to buy its stock, should News Corp. acquire a stake in Hughes, operator of the direct broadcast satellite service DirecTV.

The deal appears to put Murdoch one step closer to his longtime goal of acquiring control of a U.S. DBS operator, though such a purchase is far from guaranteed. Along with Murdoch and Malone, who have been rumored to be potential purchasers of Hughes -- both separately and in tandem -- the telco SBC Communications (SBC Quote - Cramer on SBC - Stock Picks) could also be bidding for Hughes, The New York Times reported last month.

A bidding process for all or part of Hughes is under way, according to various press reports.

Hughes' controlling shareholder, General Motors (GM Quote - Cramer on GM - Stock Picks), has been trying to cash out of its Hughes holdings for years, most notably through a proposed merger with DBS operator EchoStar Communications (DISH Quote - Cramer on DISH - Stock Picks). Citing antitrust concerns, the feds put the kibosh on that deal last fall.

A Hughes deal could conceivably end up as simply a purchase of a 20% stake in the company from GM, according to SG Cowen analyst Thomas Watts. He values such a stake at about $2.7 billion. Any transaction is likely to be complex, given its ownership structure and tax considerations, among other issues. Hughes currently trades as a tracking stock, with GM retaining 100% of the company's assets. One month ago, GM announced it was planning to contribute part of its Hughes stake to its employee benefit plans.

In the deal announced Thursday by Liberty and News Corp., Liberty has the right, within the next six months, to acquire $500 million in News Corp. "preferred limited voting ordinary" American depositary receipts, at a price of $21.50 per ADR.

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