NEW YORK -- General Motors sent a strong signal to potential buyers of its Hughes Electronics Corp. satellite subsidiary last week: Either step on the accelerator or get off the track.
GM, in consecutive statements after the stock market closed Friday, moved to alleviate tax concerns surrounding a potential purchase of Hughes, which owns the largest U.S. satellite TV operator, DirecTV. It also subtly suggested to buyers that it was prepared to spin the operation off entirely if a deal could not be reached.
"General Motors has other options, such as selling the Hughes shares in the public market and should even prompt the bidders to action knowing that something's going to happen," said SG Cowen analyst Tom Watts. "The train is leaving the station, and if they want to get on it, now's the time."
The flurry of activity Friday came as GM intensified negotiations with several potential buyers of Hughes, including News Corp., Liberty Media Corp. and SBC Communications Inc., sources close to the talks said.
GM declined to comment on the progress of any talks, saying only that negotiations were ongoing.
GM, which owns 100 percent of Hughes assets, but only 30 percent of its tracking stock, has been trying to unload the satellite division for nearly three years and is eager to complete a deal.
GM tried to help its own cause last week, analysts said, by saying it will shift 150 million Hughes shares off its books into two employee benefit plans.
The company said the contribution is designed to help alleviate its underfunded pension liability. But analysts noted it also will bring GM's total Hughes' holdings to just under 20 percent, which could make an acquisition tax free to GM under federal rules.
But that is far from a guarantee, said Robert Willens, a tax and accounting analyst at Lehman Brothers. If the Internal Revenue Service rules otherwise, it could send the deal into a thorny labyrinth of tax law.
GM will likely look to sell its remaining Hughes stake to one of the many rumored buyers for the unit and then spin the company's assets off to shareholders, Willens said.
"In order for the spin-off to continue to be tax free for GM, it's important that the former Hughes shareholders continue to own more than 50 percent of the company's new stock for a defined period," Willens said. "So it's not like SBC or someone else can promptly acquire Hughes."
To be counted against that 50 percent threshold, Hughes shareholders must be considered "historical" holders of the stock. While GM's benefit plans already owned Hughes shares before Friday's allocation, Willens said he is not sure the most recent share contribution would count toward that total.
"To me, it's pretty clear the new pension shares would not count toward that new ownership," he said.
Nevertheless, with the transfer of these shares into the pension funds, GM has effectively set the table as much as it's going to for the potential buyers.
Still, GM's patience, it seems, does have a limit.
The automaker on Friday also informed investors it was increasing a prior shelf registration to sell Hughes shares on the open market to $10 billion from $5 billion -- essentially suggesting it could spin the company off at any time.
That would create a chaotic situation for a potential buyer for the unit since it would have to negotiate for control of the company with a variety of different stock owners.
GM spokesman Jerry Dubrowski said: "The decision to include the (Hughes) shares and related securities in the shelf registration reflects our desire to maintain flexibility to engage in a variety of options."