The tortuous struggle over the fate of DirecTV – America’s largest satellite TV broadcaster – finally appears to be over, after long-standing favourite NewsCorp withdrew its bid over the weekend, handing victory to the little-fancied offer from rival satellite group EchoStar.
Rupert Murdoch’s NewsCorp, which has spent over a year negotiating a deal to buy Hughes Electronics – the General Motors unit that owns DirecTV – angrily quit the race on Saturday evening. The decision dashes Murdoch’s hopes of putting the broadcaster at the heart of a global satellite TV empire.
A GM board meeting had been scheduled for Saturday, at which the future of DirecTV was to be decided. In one corner stood NewsCorp’s $22 billion offer; in the other, a higher bid from EchoStar, America’s second largest satellite player, long seen as the second choice due to competition concerns a merger between two satellite heavyweights would raise.
However, GM postponed the decision, saying it needed more time to review the finances of the EchoStar bid. The continuing procrastination prompted NewsCorp to walk out. “We have no option but to withdraw immediately our fully negotiated and financed proposal,” fumed a statement from Murdoch. “Hughes would have been an excellent strategic fit for our global platforms, and we are disappointed with the board’s inaction in the face of an as yet unfinanced counter-proposal.”
Although the withdrawal was initially dismissed by some as a negotiating tactic, it prompted GM to enter into a series of talks with Charlie Ergen, chairman of EchoStar, in which it emerged that, against expectations, his bid had $6bn in cash commitments to help finance the deal, supplied by UBS Warburg and Deutsche Bank.
Definitive agreements between GM and EchoStar have now been signed, with the final deal involving payment of $5.5bn in cash plus 0.73 EchoStar shares for every share in Hughes. Expected to close in the second half of next year, the agreement values Hughes at around $26bn.
The merged entity would be the second largest pay-TV group in the US, claiming over 16.7 million subscribers (some 17% of the market). Nevertheless, the combination of America’s two biggest satellite television firms will attract considerable regulatory scrutiny. Should the deal be blocked, EchoStar has agreed to make a bid of around $5bn for satellite TV group PanAmSat, 80%-owned by Hughes, providing GM with a cash injection whatever happens.
The saga, it seems, has room for a couple more twists.
News source: Financial Times