dslunceford
TiVo Forum Special Member
Registered: Oct 2000
Location: No. VA/D.C.
Posts: 1624 |
 Dish/DTV call off merger....
quote:
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THE DEALMAKERS
EchoStar, Hughes walk away
By Luisa Beltran, CBS.MarketWatch.com
Last Update: 3:35 PM ET Dec. 10, 2002
NEW YORK (CBS.MW) -- EchoStar Communications agreed Tuesday to pay failed merger partner Hughes Electronics $600 million cash to end the deal, but it avoided a more costly commitment to buy Hughes' PanAmSat Corp. for $2.7 billion.
Echostar consented to the agreed upon payment, called a breakup fee, but said Hughes would retain its 81 percent ownership stake in PanAmSat.
The pair finally canceled the merger plan Tuesday after months of haggling with regulators, who opposed the combination of the nation's two largest satellite firms.
The cancellation of the $19 billion merger opens the door for Rupert Murdoch's News Corp. to make another bid for DirecTV, a unit of Hughes. General Motors(GM: news, chart, profile) is parent of Hughes.
Under terms of the agreement, EchoStar has paid Hughes a $600 million cash breakup fee. But and Hughes (GMH: news, chart, profile), a unit of Littleton, Colo.-based EchoStar (DISH: news, chart, profile) said it would take a nearly $700 million write-off in the fourth quarter because of the breakup fee and other merger-related expenses.
Shares of EchoStar shot up $2.05, or 10.8 percent, to $21.11 Tuesday while PanAmSat (SPOT: news, chart, profile) plunged $3.83, or 20.1 percent, to $15.23.
GM's stock added 45 cents to $36.62 and Hughes dropped 41 cents to $10.89.
Regulatory blocks
The EchoStar-Hughes merger has faced opposition ever since it was announced last year. The Department of Justice and the Federal Communications Commission both moved to block the deal, which would have combined the nation's leading satellite-TV providers.
Hughes operates DirecTV, the nation's top satellite TV provider, which served more than 10.9 million subscribers at the end of September. General Motors Corp. is parent of Hughes.
EchoStar owns Dish Network, the nation's second-largest satellite-TV provider with 7.78 million subscribers as of Sept. 30.
The companies had tried to push forward with the deal by the Jan. 21 "drop-dead date," when the parties involved were free to walk away.
In November, the companies offered to sell more frequencies to Cablevision (CVC: news, chart, profile) in a last-ditch effort to secure regulatory approval of the merger. See story
Charlie Ergen, EchoStar's chief executive, admitted in a conference call last month that gaining approval of the Hughes acquisition was "an uphill fight." However, the CEO had been expected to wiggle his way out of paying the $600 million breakup fee and acquiring satellite service PanAmSat for $22 a share.
"Since the merger couldn't be completed, we concluded that this settlement is the best alternative for Hughes and places us in the best position to move ahead with our business," Hughes chief executive Jack Shaw said in a statement.
Murdoch's time?
The death of the EchoStar-Hughes merger raises the likelihood that Murdoch, chairman of News Corp.(NWS: news, chart, profile), will revive his proposal for DirecTV. Murdoch dropped his campaign to acquire DirecTV after EchoStar made its unsolicited bid last year.
EchoStar's decision to drop the $19 billion Hughes acquisition and pay the $600 million fee means News Corp. can start the bidding "earlier and cleaner," said analyst Blair Levin of Legg Mason.
"It's good they settled the outstanding litigation issues because News Corp. now knows what it is bidding for," Levin said. "They don't have the overhanging litigation."
Murdoch has said recently that he would be interested in DirecTV if it became available again. The News Corp. chairman indicated last month that if the company did make a bid for DirecTV it would be for GM's controlling 30 percent stake in Hughes.
News Corp. had been prevented from speaking to Hughes because of the Jan. 21 drop-dead date and the two firms have yet to start discussions, a person familiar with situation told CBS.MarketWatch.com Tuesday. According to a Nov. 14 SEC filing, an offer from a third party would have reversed the breakup fee liability and GM Hughes would have had to pay $600 million to EchoStar.
But News Corp. has been gearing up to make a play for DirecTV. In November, News Corp. unit Fox Entertainment (FOX: news, chart, profile) raised $1.2 billion in a secondary offering.
News Corp., which also owns the Los Angeles Dodgers baseball team and publishes the New York Post newspaper, is expected to use the funds to make another bid for DirecTV. See story
An offer from News Corp. is unlikely before the end of the year. The company will have to conduct brand new due diligence on Hughes since so much time has elapsed since its last proposal for DirecTV, Levin said.
"It's hard to get things done before the end of the year," he said.
Shares of News Corp. dropped 30 cents to $26.22.
Luisa Beltran is a reporter for CBS.MarketWatch.com in New York.
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