DISH makes an offer for Hughes:
dailynews.yahoo.com
Sunday August 5 7:43 PM ET
EchoStar Bids $32 Billion for Hughes
By Jed Seltzer
NEW YORK (Reuters) - Satellite television provider EchoStar
Communications Corp. (Nasdaq:DISH - news) said on Sunday it is
making a $32 billion bid for Hughes Electronics Corp. (NYSE:GMH -
news) in a move that could trump rival News Corp. in a battle for
Hughes' coveted DirecTV network.
EchoStar is proposing to offer 0.75 of its shares for each Hughes share, valuing Hughes' stock at
about $22.83 per share, an 18 percent premium based on Hughes' closing price on Friday. EchoStar
also said it would assume about $1.9 billion in Hughes debt.
EchoStar competes with global media giant News Corp. (NYSE:NWS - news) (NCP.AX), which
seeks to merge DirecTV with its Sky Global network of satellite services.
Littleton, Colorado-based EchoStar operates the Dish Network, the No. 2 U.S. satellite television
service. El Segundo, California-based Hughes, a unit of automobiles giant General Motors Corp.
(NYSE:GM - news), has been negotiating for the sale of DirecTV since last fall.
Shareholders of General Motors and Hughes would own about 66 percent of the diluted equity in the
combined company under the EchoStar bid.
General Motors said in May it had approved talks between Hughes and News Corp., controlled by
media mogul Rupert Murdoch and based in Australia. General Motors and News Corp. have been
engaged in discussions over Hughes for some time and had negotiations as recently as last week,
sources familiar with the situation have said.
EchoStar, meanwhile, said on July 19 that it could not convince the Hughes' board to make a deal.
Officials at General Motors and News Corp. were not immediately available for comment.
EchoStar said it has identified massive synergy opportunities valued at about $37 billion, or $26 per
share, for Hughes shareholders and up to $11 billion, or $20 per share, to General Motors
shareholders.
In a letter to GM Chairman John Smith, EchoStar Chairman and Chief Executive Charles Ergen said a
combination of Hughes and EchoStar could establish a competitive alternative to the powerful U.S.
cable and broadband service providers.
``The combined company's unrivaled satellite network and subscriber base would enable it to achieve
greater profitability than either company would be able to achieve on its own,'' Ergen wrote.
DirecTV, the largest U.S. satellite television broadcaster, has already embarked on a strategy of
delivering communications through broadband networks. A broadband network is one in which the
``bandwidth,'' or range of frequencies, can be divided and shared by multiple simultaneous signals
such as voice, data or video.
The letter states that the management of Hughes and DirecTV have recently informed EchoStar that
they do not intend to pursue merger discussions with EchoStar.
``In light of the enormous benefits of our proposed combination, we are submitting this proposal
directly to you for you for your consideration,'' Ergen wrote to Smith.
Ergen said his company has reviewed the potential deal with antitrust experts, including David Boies
of Microsoft Corp. (Nasdaq:MSFT - news) antitrust trial fame, and EchoStar is confident it could
obtain antitrust clearance in a ``reasonable'' timeframe.
Although DirecTV is the coveted aspect of the deal, Hughes also controls satellite network PanAmSat
Corp. (Nasdaq:SPOT - news) and Hughes Network Systems, which supplies wireless business
networks and telecommunications equipment.
EchoStar's Dish Network serves more than 6 million subscribers in the continental United States.
Ergen owns more than half of the company but retains about 90 percent of the voting power.
Shares of EchoStar closed at $30.44 on Friday on Nasdaq, off the 52-week high of $56.44 and up
from a low of $20.50. Shares of News Corp., which owns most of Fox Entertainment Group, closed
at $38.25 on the New York Stock Exchange (news - web sites) on Friday, off a high of $57.50 in the
past year and up from the low of $28.65.
Shares of Hughes, which closed at $19.36 on Friday on the New York Stock Exchange, have
reached as high as $38.00 in the past year but are barely up from the low of $17.55. |
